GBP/USD: plan for the US session on May 23. The pound updated its monthly lows but held above 1.2612

To open long positions on GBP/USD, you need:

Buyers showed themselves in the support area of 1.2612, which I drew attention to in my morning review, and now their goal is to return to the resistance level of 1.2670, on which a further upward correction will depend. The main goal of buyers to build a good trend will be the highs of 1.2730 and 1.2789, where I recommend fixing the profits. In the scenario of a repeated decline to the support area of 1.2612, it is best to open long positions from there, provided that a false breakout is formed, or a rebound from the minimum of 1.2564.

To open short positions on GBP/USD, you need:

Bears continue to push the pound down and are waiting for a steep collapse amid talk that British Prime Minister Theresa May will announce her resignation this weekend. The formation of a false breakout in the resistance area of 1.2670 will lead to a new wave of short positions in the pound and a decrease in the pair to the low of 1.2612, the breakthrough of which will provide sellers with a road to the support area of 1.2564 and 1.2500, where I recommend fixing the profit. In a scenario of rising above the 1.2670 during the second half of the day, the short position it is best to return the bounce from a high of 1.2730.

Indicator signals:

Moving Averages

Trading is below 30 and 50 moving averages, indicating a bearish market.

Bollinger bands

In the case of growth the pound, the upward trend will be limited to the upper border of the indicator in the area of 1.2680.

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Description of indicators

  • MA (moving average) 50 days – yellow
  • MA (moving average) 30 days – green
  • MACD: fast EMA 12, slow EMA 26, SMA 9
  • Bollinger Bands 20
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EUR/USD: plan for the US session on May 23. Weak reports on the eurozone allowed to break through the level of 1.1143

To open long positions on EURUSD, you need:

Buyers missed the support level of 1.1143 against the background of weak reports on the Eurozone and Germany, which indicated a decrease in activity indices. A new task for the second half of the day is to return to the range of 1.1143, which may lead to an update of the morning resistance level in the area of 1.1166, where I recommend fixing the profits. In the case of a further decline in the euro, it is best to return to long positions to rebound from a large low of 1.1112.

To open short positions on EURUSD, you need

Bears are required to form a false breakdown in the resistance area of 1.1143, which will maintain the downward potential and lead to a further reduction of EUR/USD to the support area of 1.1112 and 1.1079, where today I recommend fixing the profits. In a scenario of growth of EUR/USD above the resistance of 1.1143, short positions can be opened immediately to rebound from a maximum of 1.1166. Given the elections to the EU Parliament, volatility will continue to be extremely low.

Indicator signals:

Moving Averages

Trading is below 30 and 50 moving averages, which indicates the bearish nature of the market.

Bollinger Bands

The volatility of the indicator is low, which does not give signals to enter the market.

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Description of indicators

  • MA (moving average) 50 days – yellow
  • MA (moving average) 30 days – green
  • MACD: fast EMA 12, slow EMA 26, SMA 9
  • Bollinger Bands 20
The material has been provided by InstaForex Company - www.instaforex.com

Elections to the European Parliament and the possible resignation of Theresa May

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It seems that there are no more interesting events than the elections to the European Parliament, which will start today. Therefore, traders should closely monitor the dynamics of the euro, from which we can expect increased volatility in the coming days.

Many investors fear that populist parties may take a significant number of seats in the representative body of the EU.

By Sunday, it will be known whether eurosceptics will be able to get enough mandates to block rather than just slow down the legislative process.

The results can also have a significant impact on the upcoming elections in Italy. Rome plans to adopt a budget whose deficit exceeds the threshold value of the eurozone. If the Italian populists enlist sufficient support, then they can feel confident in their abilities and go for a confrontation with Brussels.

Despite the widespread belief that anti-European sentiment is negative for the euro, it should be recognized that populism does not always harm currencies. Take, for example, the United States and Australia. Donald Trump's protectionist policies helped the US dollar, and his Australian namesake strengthened after the unexpected victory of Prime Minister Scott Morrison's center-right Liberal Party over the weekend.

Will the euro be able to grow if the eurosceptic succeed in the elections? It's hard to say for sure now. The election results will be published gradually, so we can not see the breakdown until at least Sunday, and then you can even expect a gap.

Technically, the EUR/USD pair is trading in a downtrend and, apparently, will not unfold until it closes above the mark of 1.1250.

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Meanwhile, the pressure on other currencies remains strong.

The pound sterling fell to 6-month lows against the US dollar after a negative reaction to the proposal of Prime Minister Theresa May on Brexit.

Apparently, T. May's plan was not viable, since Labor and the Conservatives said that they would not support her proposal to first approve the deal on the Customs Union and may consider the option of holding a second referendum on this issue.

In addition, there are many rumors that the Conservatives will try to send T. May to resign in the coming days, not even giving her a chance for the last attempt.

British Prime Minister T. May is preparing to resign, reports The Times, citing her fellow party members, who believe that the head of the Cabinet will announce this tomorrow, May 24, after a meeting with the Chairman of the Parliamentary "Committee of 1922" Graham Brady.

"She hoped that she should take the last step, but if this is not possible, then she gets out of the way," said one of the colleagues of the British Prime Minister.

"It seems that now among the most likely scenarios are the failure of the vote in early June, the resignation of T. May and the announcement of general elections in the country. It is possible that this will lead either to a "hard" Brexit or to the formation of the government of Jeremy Corbyn. Neither looks good for the pound. It is still unknown whether the clouds that are over the Old World and over the euro due to the elections to the European Parliament will be able to keep the EUR/GBP pair below 0.8800, however, the pressure on GBP/USD may well turn into a passage to the support level of 1.2500 and even a little further," – says John Hardy, currency strategist at Saxo Bank.

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After updating the monthly lows, the USD/CAD pair returned to the range in which it has been since the end of April. "Loonie" was under attack due to lower risk appetite and almost 3% drop in oil prices.

Analysts at Danske Bank believe that the chances for a moderate strengthening of the "Canadian" remain.

"Despite the extremely negative signals from the United States and China, the parties are in no hurry with the implementation of the latest threats, and the growth of the global economy in the near future may not be as weak as investors expect, and will contribute to maintaining high oil prices," – said the representatives of the financial institution.

According to the forecast of Danske Bank, within a month, USD/CAD will fall to the level of 1.33, and in the three-month perspective – to the level of 1.31.

The bank also believes that investors are mistaken in their expectations regarding the interest rate cut by the Bank of Canada.

"The probability of this event in the next 12 months is estimated by the market at 50%, but we are confident that the rate will remain unchanged. However, we do not think that the re-evaluation of the prospects will provide "loonie" significant support, as investors look at the rate in Canada through the prism of the Fed's rates, so the adjustment of expectations is unlikely to affect the differential rates," – said the experts.

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Total trade war can collapse most currencies

The threat of an escalation of the US and Celestial trade war triumphed the greenback and hit primarily on the positions of the currencies of developing countries.

Based on the reports of Bloomberg, the salvo released by Donald Trump on May 10 for Chinese imports in the amount of $200 billion helped the US currency strengthen and caused damage to EM assets - from Taiwan and the Republic of South Africa to Brazil.

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According to Salman Ahmed of Lombard Odier Investment Managers, "The currencies of developing countries are most vulnerable to the escalation of the trade war of the two largest economies in the world. A quick solution to the problem is hardly worth the wait".

As tensions increase in trade relations between Washington and Beijing, traders are trying to understand whether developing countries are able to overcome the problems that caused the exchange rates of national currencies to rise and fall in the US dollar, or at least be able to withstand the strengthening of the American currency. In turn, they could take advantage of the interest rate and higher returns.

JPMorgan Chase strategists doubt this. Last week, they moved to a position "below the market" in EM currencies, including the South African rand and the Taiwan dollar.

"A change in the direction of trade negotiations could lead to a downward revision of forecasts for the growth of currencies of developing countries. We believe that the market needs to adjust its expectations depending on the results of trade negotiations between the United States and China", representatives of the bank said.

"It is the most undervalued topic on the market," commented by Thomas Korterg, an economist at Pictet Wealth Management.

Experts at Goldman Sachs warned that there may be many currencies in the line of fire - from the euro to the South African rand and the Chilean peso.

"Taiwan and South Korea could lose the most if the situation escalates. Won and Chinese yuan, as well as the Taiwanese, Australian and Canadian dollars, are subject to risks, and the euro can fall quite strongly. To protect against downside risks, I advise you to take short positions in these currencies or invest in bonds of the respective countries", said by the head of the currency strategy at Westpac, Richard Franulovich.

Nordea Investment Funds believes that "If Washington and Beijing fail to make a deal that will prevent an all-out trade war, then the Chinese yuan will be 10% depreciated. This can create a domino effect on the currencies of developing countries sector".

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Technical analysis of USD/CHF for May 23, 2019

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Overview:

The USD/CHF pair continues moving in a bullish trend from the support levels of 1.0123 and 1.0177. Currently, the price is in an upward channel.

This is confirmed by the RSI indicator signaling that the pair is still in a bullish trend. As the price is still above the moving average (100), immediate support is seen at 1.0177.

Consequently, the first support is set at the level of 1.0177. So, the market is likely to show signs of a bullish trend around 1.0177.

In other words, buy orders are recommended above the level of 1.0177 with the first target at the level of 1.0265. Furthermore, if the trend is able to breakout through the first resistance level of 1.0265, we should see the pair climbing towards the point of 1.0314.

However, it would also be wise to consider where to place a stop loss; this should be set below the second support of 1.0123.

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The dollar has reached a monthly high and is preparing to take a new height

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The dollar has updated the monthly maximum and is not going to stop; the economic and political uncertainty that has swept Europe and Asia is pushing the "American" up and putting pressure on most major currencies, including the euro and the yuan. The problems of German production, the consequences of the trade war for Asian countries, concerns about Brexit and the upcoming European parliamentary elections — against this background, the US, where the only problem is the trade conflict with China, looks the most attractive, and investors see the dollar as a relatively safe haven.

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There is every reason to believe that in the short term, the dollar will retain its popularity as a safe haven, even though the Fed is more relaxed than expected. Especially against the background of other central banks, which are lowering interest rates one by one, the Fed looks like an "aggressor". The pigeon tone of the world Central Bank will support the growth of the dollar. Other factors are also on the side of the "American". The activity in the services and manufacturing sectors in Germany is falling, which indicates problems in Europe's largest economy. Concerns about the global economy are exacerbated by growing political uncertainty, especially in Europe. Brexit and parliamentary elections make investors worry about the stability of the euro and the pound. Both currencies are falling in price.

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In addition to the dollar, one should pay attention to the Japanese yen, which has risen sharply in price, since the constant fears of another escalation in the trade conflict between the US and China are excellent grounds for growth. If we add Brexit and other European problems to this, then the yen is waiting for a further rise. The currency rose to 110.23 yen per dollar, rebounding from a two-week low of 110.675, broken through on Tuesday, and also rose 0.2% against the euro, added 0.5% against the pound and rose 0.3% against the Australian dollar.

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Simplified wave analysis and forecast for GBP/USD and USD/JPY on May 23

GBP/USD

Analysis of the structure of the last medium-term wave of the British pound from March 13 shows that it is close to completion. The price of the pair is in the upper part of the wide potential reversal zone of the oldest TF. In the wave of May 3, two days ago, the final part of the wave (C) started.

Forecast:

The chance that the price of the pair will slip through the zone of powerful support is very small. In the next day, the most likely scenario for the pound will be an upward rebound, up to the upper limit of the price corridor between the nearest counter zones.

Recommendations:

Proponents of trade within the session can make short-term sales of the pound while taking into account the limited potential of the move down. Buying the pound today can be very risky. It is recommended to refrain from trading during the price rollback and look for sell signals at its end.

Resistance zones:

- 1.2690 / 1.2720

Support zones:

- 1.2600 / 1.2570

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USD/JPY

The direction of the short-term fluctuations of the Japanese currency is given by the rising wave of May 13. In a larger wave, it gave rise to the final part (C). The wave has a high wave level, and over time, the entire movement will move to the senior TF. Since the beginning of the current week, the pair is falling, forming a correction to the previous trend section of the chart.

Forecast:

Today, in the first half of the day, the downward course of the pair's movement is expected to continue, until its completion in the support zone. By the end of the day, the probability of a change in the direction of price movement increases.

Recommendations:

Before the appearance of reversal signals, it is worth refraining from trading or to significantly reduce the lot during sales. It is necessary to take into account the limited potential of reduction. Next, when the reversal signals appear on your TS, it is recommended to look for the points of purchase of the pair.

Resistance zones:

- 110.70 / 111.00

Support zones:

- 110.10 / 109.80

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Explanations to the figures: Waves in the simplified wave analysis consist of 3 parts (A – B – C). The last unfinished wave is analyzed. Zones show areas with the highest probability of reversal. The arrows indicate the wave marking according to the method used by the author, the solid background is the formed structure, the dotted ones are the expected movements.

Note: The wave algorithm does not take into account the duration of tool movements over time.

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Technical analysis of USD/CAD for May 23, 2019

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Overview:

The USD/CAD pair continues to move upwards from the level of 1.3457. The pair rose from the level of 1.3457 (the level of 1.3457 coincides with a ratio of 61.8% Fibonacci retracement) to a top around 1.3505. But it rebounded from the top pf 1.3505 to 1.3477. Today, the first support level is seen at 1.3457 followed by 1.3425, while daily resistance 1 is seen at 1.3457. According to the previous events, the USD/CAD pair is still moving between the levels of 1.3505 and 1.3457; for that we expect a range of 48 pips (1.3505 - 1.3457). On the one-hour chart, immediate resistance is seen at 1.3505. Currently, the price is moving in a bullish channel. This is confirmed by the RSI indicator signaling that we are still in a bullish trending market. The price is still above the moving average (100), Therefore, if the trend is able to break out through the first resistance level of 1.3505, we should see the pair climbing towards the daily resistance at the levels of 1.3532 and 1.3560. It would also be wise to consider where to place stop loss; this should be set below the second support of 1.3425.

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Euro will fall and there is no reason for optimism at all

Business growth in the eurozone has accelerated but it is difficult to call it good news for the euro. The rise was minimal due to the ongoing downturn in the manufacturing industry. The data confirms the words of the ECB President Mario Draghi about the need for "greater support for the eurozone economy." The IHS Markit Purchasing Managers Index (PMI), which is considered to be an indicator of the state of the economy, rose only to 51.6 points in May from 51.5 points in April. At present, one cannot hope for stronger growth in the second quarter, as the economy is in limbo. Indicators suggest that GDP growth is likely to be 0.2 percent in this quarter, which is less than the previous forecast of 0.3 percent.

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Separately, it is possible to note more pessimistic moods from business leaders for the first time since August 2014 as they have reduced the number of staff. The employment index fell to 49.0 from 50.7 points. The index of business activity in the manufacturing sector is noticeably lagging behind the service sector, which is currently dominant. It is true that growth here has slowed down. Moreover, PMI fell from 52.8 to 52.5 points, which contradicts expectations of moderate growth to 53.0 points. The export business among service firms, including the trade between member countries of a block, has suffered due to weaker global growth, as well as trade tensions and Brexit. The sub-index fell to 48.1 points, which is one of the weakest values since IHS Markit began collecting these data at the end of 2014.

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Overview of GBP/USD on May 23. The forecast for the "Regression Channels". "Hard" Brexit or a second referendum?

4-hour timeframe

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Technical data:

The upper linear regression channel: direction – down.

The lower linear regression channel: direction – down.

The moving average (20; smoothed) – down.

CCI: -97.0078

In recent days, the UK has been covered with the news about the resignation of Theresa May, and voluntary, about her failure in negotiations with Labor, the rejection by the House of Commons of the "new" version of the "deal" with the EU from Theresa May. As you can guess, all this news was frankly negative for the pound sterling. It seems that Theresa May will not wait for the fourth vote, and the Parliament made it clear to her that it will not accept her version of the agreement on leaving the EU this time. From our point of view, Theresa May's resignation had to happen at the first or second vote of no confidence. In this case, the head of state would have been a new Prime Minister, who would have started work on this issue first. Now, the UK will have to participate in the elections to the European Parliament, while continuing to try by all means to leave the EU. The new Prime Minister is likely to be Boris Johnson, who is an ardent supporter of the "hard" Brexit. There is a reason to believe that this issue will be resolved with him much more quickly, although it may not be as pleasant for the UK as we would like. However, the whole country has already realized that it's impossible to quit the EU "in a soft way". Accordingly, either to cancel Brexit through the second referendum or "hard" scenario. Meanwhile, the pound continues its free fall. Bears continue to push the pair down, as there is no reason to buy the British currency. To characterize the technical picture of the pound/dollar pair does not even make sense, it is obvious and there is no alternative.

Nearest support levels:

S1 – 1.2634

S2 – 1.2573

Nearest resistance levels:

R1 – 1.2695

R2 – 1.2756

R3 – 1.2817

Trading recommendations:

The pair GBP/USD continues its non-stop downward movement. Thus, sales of the pound sterling with targets at 1.2634 and 1.2573 are still relevant, before the Heiken Ashi indicator turns up, indicating a new round of upward correction.

It is recommended to consider long positions after the consolidation of the pair above the moving average with the targets at 1.2878 and 1.2939. However, at the moment, the position of the bulls is extremely weak, and this option is not expected in the near future.

In addition to the technical picture should also take into account the fundamental data and the time of their release.

Explanation of illustrations:

The upper linear regression channel – the blue line of the unidirectional movement.

The lower linear regression channel – the purple line of the unidirectional movement.

CCI – the blue line in the indicator regression window.

The moving average (20; smoothed) is the blue line on the price chart.

Murray levels – multi-colored horizontal stripes.

Heiken Ashi is an indicator that colors bars in blue or purple.

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Overview of EUR/USD on May 23. The forecast for the "Regression Channels". The Fed is not going to change the key rate in

4-hour timeframe

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Technical data:

The upper linear regression channel: direction – down.

The lower linear regression channel: direction – up

The moving average (20; smoothed) – down.

CCI: -86.8916

As we said in yesterday's two reviews of euro/dollar, there was no particular reaction to Mario Draghi's speech and the publication of the Fed's protocol. The head of the ECB did not touch on the monetary policy of the European Union in his speech in Frankfurt, and the publication of the minutes of the last meeting of the Fed showed only what was already clear to all participants of the Forex market. No changes in monetary policy are expected in the coming months, the country's economy does not need to be stimulated, inflationary pressure remains at an insufficient level, the labor market and wages continue to show positive dynamics. In addition, members of the Federal Open Market Committee noted that since the beginning of the year, economic risks have decreased slightly, but most are still concerned about the trade war between China and the States. What are traders waiting for today? Today in the eurozone, preliminary values of the indices of business activity in the areas of production and services Markit for May will be published. Despite the fact that these are not the final values, we recommend paying attention to these data, since last time they caused a surge of activity among traders. After lunch, similar data will be released in America, and we also do not recommend to lose sight of them.

Nearest support levels:

S1 – 1.1139

S2 – 1.1108

S3 – 1.1078

Nearest resistance levels

R1 – 1.1169

R2 – 1.1200

R3 – 1.1230

Trading recommendations:

The EUR/USD currency pair resumed its downward movement after several weak turns of correction. Thus, it is now recommended to trade short positions with targets at 1.1139 and 1.1108.

It is recommended to consider long positions on the euro/dollar pair very carefully and small lots not earlier than fixing the price above the moving average with the first target of 1.1200.

In addition to the technical picture should also take into account the fundamental data and the time of their release.

Explanation of illustrations:

The upper linear regression channel – the blue line of the unidirectional movement.

The lower linear regression channel – the purple line of the unidirectional movement.

CCI – the blue line in the indicator window.

The moving average (20; smoothed) is the blue line on the price chart.

Murray levels – multi-colored horizontal stripes.

Heiken Ashi is an indicator that colors bars in blue or purple.

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EURUSD: Fed protocols did not affect the market. Economists expect weak US inflation

In the afternoon, all the attention of traders was focused on the minutes from the last meeting of the Federal Reserve System, which had no effect on the market, leaving everything in its place. Low volatility is associated with the elections to the European Parliament, which begin today and the results of which will be known at the weekend.

As for the Fed's protocols, the emphasis was shifted to economic growth and inflation. The Fed economists forecast a short-term slowdown in US GDP growth compared with growth rates in the first quarter of this year, but they expect an acceleration in GDP growth in the medium term.

As for inflation, in the opinion of many managers, the weakness of inflation is a temporary phenomenon, but the Fed needs to continue to follow a patient approach. Only a few Fed officials were concerned that inflationary pressures could rise quickly. The protocols indicate that the increased downward risk for inflation will be short-term and temporary.

The Fed also reported on trade relations between the United States and a number of other countries. Fed economists expect trade policy to have a significant negative impact on future economic growth, and the Central Bank should take a patient approach, even if the situation in the global economy and financial conditions improve.

On Wednesday evening, US Secretary of the Treasury Steven Mnuchin also spoke on the US national debt ceiling, which can be achieved at the end of this summer. Mnuchin pointed out that the Federal government would not be able to meet all its obligations after that, and urged Congress to raise the debt ceiling as soon as possible. The problem of the debt ceiling in the United States is constant, but in recent years it has received less and less attention.

As for the technical picture of the EURUSD pair, it remained unchanged. The further downward movement will depend on the support level of 1.1140, a breakthrough of which will only increase the pressure on risky assets and lead to an update of the minimum of 1.1110. The growth of the euro will be limited to the upper limit of the side channel in the area of 1.1190.

Oil prices fell after yesterday's report of the US Department of Energy, in which it was stated that commercial oil reserves in the US increased last week. According to the Energy Information Administration, oil reserves rose by 4.7 million barrels, to 476.8 million barrels, while analysts expected a decrease in oil reserves by 1.4 million barrels. Gasoline inventories increased by 3.7 million barrels, to 228.7 million barrels, and distillate stocks rose by 768,000 barrels, to 126.4 million barrels. Oil refining capacity utilization decreased by 0.6 percentage points to 89.9%.

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Bitcoin. Bulls did not cope with the task, because of what the correction began

Bitcoin buyers failed to hold on to the achieved levels, as a result of which a number of long positions were closed and cryptocurrency decreased. However, this is nothing more than an extension of the side channel with a lower border in the area of 7260. Yesterday, it became known that Japan continues to move towards the development of the cryptocurrency industry. The Japanese regulator issued a statement saying that work is underway to consolidate the status of cryptocurrencies at the legislative level, as well as to update the legislative framework to strengthen the actions of local regulations in the field of cryptocurrency trading.

Signal to buy Bitcoin (BTC):

Bitcoin buyers need to return to the resistance level of 7640, which was missed yesterday. Only after that, it will be possible to argue again on the topic of updating the annual highs in the area of 8440 and 8700, where I recommend fixing the profit. The main goal is to test the psychological level of 9000 USD. In the scenario of further correction, there is a support level of 7 260, from which you can open long positions immediately on the rebound.

Signal to sell Bitcoin (BTC):

Bears have returned to the level of 7640, and their main task is to keep Bitcoin under this range. In case of an unsuccessful return on it, the pressure on the cryptocurrency will increase, which will lead to an update of the minimums of 7260 and 6820, where I recommend fixing the profits.

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Jump over the abyss: the oil market is on the verge of collapse

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According to some analysts, the black gold market is preparing for a large-scale collapse. Experts believe that the first alarming bell is the collapse of quotations by more than 2%. This is the most significant drop in the last two weeks, experts remind.

Prices for black gold began to fall in the morning on Thursday, May 23, and the publication of oil and oil products from the US Department of Energy gave acceleration to this process. They have increased in all three main points: crude oil reserves increased by 4.7 million barrels, gasoline - by 3.7 million barrels, and distillates - by 0.8 million barrels. At the same time, experts recorded an increase in oil production, which updated the new record. Over the past week, 12.2 million barrels per day were produced in the United States. Sales of oil from the strategic reserve by the US Department of Energy reached 1.2 million barrels per day.

The report says that America has resumed purchasing Venezuelan oil. Over the past week, deliveries of black gold from Venezuela amounted to 49 thousand barrels per day. According to experts, this is not a very large volume: a year earlier, deliveries reached 352 thousand barrels per day. In April of this year, the United States also made small purchases of oil from Venezuela (71-191 thousand barrels of oil per day).

At the moment, experts are fixing one of the important factors for preparation of a strong decline in the market of black gold. It concerns oil futures. Recall that this financial asset is almost always traded in the general trend with the US stock market. Currently, the situation in this segment is extremely unstable. If the trade war between the United States and China will cause powerful sales in the securities market, then oil quotes will fall after them, analysts caution.

The change in sentiment in the market is confirmed by the fact that its participants close long positions and form short ones, that is, they'd start the game for a fall. On Thursday, during the Asian session, trading is conducted in a negative way. At the moment, Brent and WTI futures have lost a little more than a third percent. At the same time, futures on US stocks also reduced.

According to the analysts, the market is currently having some confusion. Experts do not exclude the fact that large players artificially keep quotes at acceptable levels. Experts find it difficult to predict further developments and urge to closely monitor the situation on the market.

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Investors will continue to move away from risk: We expect AUD/USD and GBP/USD pairs to gradually decline

The minutes of the May meeting of the Fed, promulgated on Wednesday, as we expected showed the desire of the American regulator to continue to take a wait-and-see attitude towards monetary policy.

Recall that following the meeting, the Fed decided to leave the key interest rate unchanged and announced that it will closely monitor the dynamics of inflation, trends in the US economy and in the external events, which implies the situation with the negotiation process between China and the United States on trade.

Markets reacted moderately to the protocol content. The general sentiment on them remains weakly negative, as investors understand that the lack of reaching a new trade agreement between the Americans and the Chinese is a key factor for the global economy, as well as an increased pressure from the United States that joined Japan and the United Kingdom (Chinese manufacturing giant Huawei) increases the gap in reaching agreements.

In the foreign exchange market, the US dollar continued to strengthen against major currencies with the exception of the Japanese and Swiss currencies. The yields on US government Treasury bonds also dropped following Wednesday, indicating a continuation of the dynamics of investor's risk aversion. As we see it, this state of affairs will continue until there is at least some, albeit intermediate, trade agreement between Beijing and Washington. But so far, it seems that it is not necessary to count on it. We generally get the impression that the American president will decide to correct his position and take a real step towards reaching an agreement in the second half of this year, or more precisely, in order to have a strong trump by the start of a new election campaign in America.

If indeed our scenario turns out to be true, then the current state of affairs on world markets in general and on the foreign exchange market will be preserved, in particular. The rate of the US dollar may be generally strengthened further in relation to the major currencies. The currencies of EM countries will remain under pressure, as capital will continue to leave emerging markets.

As for the situation in the short term, we are waiting for dollar purchases on any noticeable corrections that may be inspired by rumors, speculation, and local positive news, as well as Donald Trump's statements regarding the negotiation process between China and the United States.

Forecast of the day:

The AUD/USD pair consolidates above the level of 0.6865. It may continue falling to 0.6800 if she falls below this mark. The lack of trade agreements between the United States and China is negative for the pair.

The GBP/USD pair remains under pressure in the wake of the high probability of Theresa May leaving the post of British Prime Minister. A decline in the pair below 1.2620 may lead to a fall in prices to 1.2575 and then to 1.2550.

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USDCAD: USD firms against CAD, May 23, 2019

The USD/CAD pair has been consolidating in the corrective range from 1.3350 to 1.3500 for a few days now with a preceding bullish trend.

The minutes of the recent US Fed's meeting turned out to be quite mixed. However, it provided support for the American currency. The US Federal Reserve officials at the meeting agreed that their current patient approach to setting monetary policy could remain in place for a certain period where policymaker see little need to change rates in either direction. By controlling short-term rates, the Fed hopes to influence the broader economy to maximize employment and keep inflation near its target. Recent weak inflation was viewed by many participants as to be transitory, while risks to financial markets and the global economy had appeared to ease – a judgment rendered before the Trump administration imposed higher tariffs on Chinese goods and took other steps that intensified trade tensions.

The Federal Reserve may consider tweaking how much it pays mortgage agencies, money market funds and other non-banks in certain Treasury-backed transactions. The US house prices will rise this year by less than was predicted just three months ago, despite the Federal Reserve wiping out the prospect of future interest rate rises and recent market speculation about a cut. While property market experts said a lack of supply of affordable new homes is likely to persist and so house price rises will outpace overall inflation. The US economic growth beat expectations in the first quarter but has since started to show signs of a slowdown. Existing home sales, which make up for about 90% of all home sales in the United States, slipped in April for the second straight month.

Today's US unemployment claims report is expected to show an increase to 215k from the previous figure of 212k, the new home sales data is anticipated to drop to 678k from 692k, the flash manufacturing PMI is forecast to rise to 53.0 from the previous level of 52.6, while the flash services PMI is to inch up to 53.6 from 53.0.

On the CAD side, the lift of tariffs on the Canadian steel by the US in order to prevent the Chinese steel from entering the US market will help to boost the Canadian economy in the coming days. According to foreign minister Chrystia Freeland, Canada will move quickly to ratify the new North American trade pact. Despite the breakthrough on tariffs and the USMCA agreement last year, Canada was still worried about US protectionism. Recently, Canada's retail sales report indicated an increase to 1.1% from the previous value of 1.0%, while the reading was expected to lower to 0.8%, and the core retail sales grew significantly to 1.7% from 0.7%, while experts anticipated it to be at 0.8%.

The positive retail sales data provided support for the loonie. However, it could not sustain it further as the FOMC meeting had its cut of the pie. The US dollar is likely to remain a dominating currency in the pair for now.

Now, let us look at the technical view. The price has recently bounced from the 1.3350 support area and moved upwards. It formed a bearish rejection pattern with a daily close inside the corrective range between 1.3350 and 1.3500. As for the preceding trend, the pair is expected to rise as far as it remains above the 1.3350 area with a daily close targeting 1.3500 and later the 1.3600 resistance area in the coming days.

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Forecast for EUR/USD and GBP/USD on May 23. Theresa May may resign in the coming days

EUR/USD – 4H.

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The euro/dollar pair performed the second rebound from the retracement level of 100.0% (1.1177) and a turn in favor of the US currency. As a result, on May 23, traders can again count on some fall towards the retracement level of 127.2% (1.1102). Bears remain extremely strong. Last night, the Fed published a document, the minutes of the last meeting. From this document, it became clear that the Fed is not going to raise rates in the near future, as "inflationary pressure" remains insufficient. Of course, not without "concerns about the trade war between China and the United States." Thus, the chances of the euro were not given yesterday. Today in the European Union and Germany, there will be the indices of business activity in the sectors of production and services in May. The same indices will be released in the US. This news will again be tracked by traders, but bears will pay more attention to them, as they now own the initiative. Only the consolidation of EUR/USD quotes above the Fibo level of 100.0% will work in favor of the EU currency and will allow expecting some growth in the direction of the retracement level of 76.4% (1.1241).

The Fibo grid was built on the extremums from March 7, 2019, and March 20, 2019.

Forecast for EUR/USD and trading recommendations:

The EUR/USD pair retains the desire to continue the process of falling (double rebound from the Fibo level of 100.0%) towards the level of 1.1102. Thus, I recommend selling the euro for this purpose, with a protective order above the Fibo level of 100.0%. I recommend buying the pair after the closure of the rate above the level of 100.0% from the retracement level of 1.1241.

GBP/USD – 4H.

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The pound/dollar pair is still under the power of bears. Sellers are now so strong that the pair can not even rollback a little up. Hope for a rollback in the pound is today when the quotes performed a fall to the Fibo level of 23.6% (1.2639), and a bullish divergence is brewing in the MACD indicator. However, both of these retracement factors can be ignored by bears, and sales can continue. Closing the GBP/USD rate below the level of 23.6% will increase the chances of a further fall in the quotes in the direction of the next retracement level of 0.0% (1.2437). The consumer price index in the UK in April rose by 0.6% mom and 2.1% y/y. But the forecasts were higher, so traders again did not find factors for buying the pound.

The Fibo grid is built according to the extremes of September 20, 2018, and January 3, 2019.

GBP/USD – 1H.

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On the hourly chart of the GBP/USD, after quoting the quotations from the Fibo level of 127.2% (1.2782), the pair has resumed the process of falling and executed the consolidation under the retracement level of 161.8 % (1.2673). The bullish divergence of the CCI indicator allowed the pound quotes only to return to the Fibo level of 161.8%, no more. As a result, the fall of the pound/dollar pair may resume today in the direction of the retracement level of 200.0% (1.2554). Economic indicators are not expected from the UK today, but we should not lose sight of the ongoing Saga of Brexit. There was information that Theresa May may resign just the other day, as many members of the government believe that the Prime Minister has completely lost control of Brexit and the process of withdrawal from the European Union is not progressing and is not going forward. Theresa May's resignation may for some time even cause demand for the pound, as traders may be optimistic about this event.

The Fibo grid is built on the extremes of April 25, 2019, and May 3, 2019.

Forecast for GBP/USD and trading recommendations:

The GBP/USD pair continues the process of falling, so I recommend selling the pair with a target of 1.2554 with a stop loss order above the level of 161.8%. I recommend buying the pair in very small volumes at the rebound from the Fibo level of 200.0% (hourly chart) with a target of 1.2673 and a protective order under the level of 1.2554.

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Wave analysis of EUR / USD and GBP / USD for May 23. How will the European Parliament elections affect the Eurocurrency?

EUR / USD

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On Wednesday, May 22, trading on the EUR / USD pair ended with a decline of 10 basis points. The wave pattern of the instrument does not change completely, as the euro drops by 10-20 bp each day, continuing to build a downward wave, presumably 3, 3, 3. Markets can only remain in the trend, whose immediate goals are located around 11 figures and below. Today, on Thursday, the elections to the European Parliament will begin. The main question is one: will a sufficient number of euro skeptics take their places among the 751 deputy seats? Rumors in the current elections suggests that the number of populist deputies will increase dramatically, which has been going for a long time. How can this affect the euro? Most likely, it has no effect in the short term. In order for the impact of the election results to begin, the Parliament should start taking appropriate decisions, different in nature from current policies. I believe that the small bursts of activity are possible, and even then the election results will be known, not earlier than next Monday.

Sales targets:

1.1097 - 161.8% Fibonacci

1.1045 - 200.0% Fibonacci

Purchase goals:

1.1324 - 0.0% Fibonacci

General conclusions and trading recommendations:

The euro / dollar is still in the process of building a downward trend.Now, I recommend for the bears to remain on the instrument with targets at 1.1097 and 1.1045, which corresponds to 161.8% and 200.0% Fibonacci. I recommend transferring a restrictive order to the level of 100.0% Fibonacci.

GBP / USD

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On May 22, the GBP / USD pair lost another 45 basis points and came up against the Fibonacci level of 161.8%. Estimated wave continues to build and, given the news background, it can take a very long look. Markets diligently get rid of the pound against the background of complete uncertainty about the future of Brexit. Moreover, yesterday, the information was released saying that Theresa May could resign on May 24, that is, tomorrow. On one hand, it can positively affect the pound. Meanwhile, this also means the arrival of a new prime minister, with new views on Brexit, who will most likely try to start new negotiations with the European Union or whether to go to the unordered Brexit. Anyway, the pound may start to grow at first, so that it coincides with the completion of the construction of the wave. Furthermore, everything will depend on the actions of the new prime minister.

Sales targets:

1.2554 - 200.0% Fibonacci

1.2360 - 261.8% Fibonacci

Purchase goals:

1.3175 - 0.0% Fibonacci

General conclusions and trading recommendations:

The wave pattern of the pound / dollar instrument implies a continuation of the instrument decline within the wave c. Thus, now I still recommend selling pounds sterling with targets located near the calculated levels of 1.2554 and 1.2360, which corresponds to 200.0% and 261.8% of Fibonacci. An unsuccessful attempt to break through the 1.2554 mark could lead to the completion of the downward wave.

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Trading plan for EUR / USD and GBP / USD pairs on 05.23.2019

Listen, all the popcorn has already been eaten and they continue to aggravate the situation. The leader of the House of Commons has already resigned because of her disagreement with Theresa May's new plan in agreement with the European Union. Andrea Linds stated that she categorically disagreed with the possibility of holding a referendum on the ratification of the divorce agreement. Yet, this is only the tip of the iceberg since many ministers expressed their indignation at the fact that the provisions of the new version of the agreement voiced on Tuesday by Theresa May did not correspond to what was discussed by the cabinet. Although the Prime Minister from the rostrum of the House of Commons stated that this version of the agreement was agreed by all the ministers. So, there was the smell of Theresa May's early resignation in the UK and various media asserted that this could happen this weekend. I.e, Brexit will have to deal with her receiver. However, there is no time for this and the eviction of Great Britain from the European dormitory will take place according to the worst scenario - without an agreement. Even if Teresa May dares and issues an agreement to a vote of the House of Commons, that the conservatives will definitely be rejected by the Laborists, as has been repeatedly stated. And if the first three versions of the agreement suited at least one of the parliamentarians, now those are not observed. And of course, investors are now proceeding solely from the fact that the output will be tough and with unpredictable consequences for the British economy, which is reflected in the pound exchange rate. These sentiments themselves have a negative effect on the single European currency. and the eviction of the UK from a European dormitory will take place under the worst scenario - without an agreement.

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But what saddens me the most is that all the popcorn ended precisely while watching the British joker, that is, before the minutes of the meeting of the Federal Commission on Open Market Operations were published. Yes, everyone was so stunned by what is happening in the United Kingdom that they completely forgot about this boring document, although its content is just fine. I will not go into details on how the leadership of the Federal Reserve System assesses the state of the labor market or inflationary dynamics and better get to the point. From the text of the protocol, the wording has disappeared not only regarding the timing of the increase in the refinancing rate, but also in general about the interest rate increase itself. However, it found its place extremely vague wording that the Federal Commission for Operations in the open market will consider the question of future adjustments to the refinancing rate based on the general economic dynamics, as well as the state of the labor market and inflation compliance with target levels. That is - understand how you want. It follows from these words that the Federal Reserve System can both raise the rate and lower it. Yes, and it can do at any time. Everyone was so keen on the drama that unfolded in the United Kingdom that they did not notice such an interesting change in the position of the Federal Reserve System who can raise rates as well as lower them. Yes, and it can be done at any time.

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The sequel to the exciting series called Brexit is scheduled for tomorrow. As for today in the UK, there are elections to the European Parliament and until it is known how serious the failure of the conservatives will be, no one will do or say anything. Tomorrow there is a scheduled meeting between Theresa May and the leadership of the Conservative Party. Therefore, the lull on the Brexit issue will clearly have a beneficial effect on both the pound and the single European currency. Moreover, preliminary data on indices of business activity in Europe will be published today, which should show growth. In particular, the business activity index in the manufacturing sector should grow from 47.9 to 48.1, while in the service sector, growth is expected from 52.8 to 53.0. Thus, it is not surprising that a composite index of business activity is expected to increase from 51.5 to 51.7. Moreover, American statistics may somewhat disappoint investors due to a possible increase in the total number of applications for unemployment benefits as much as 13 thousand. Thus, the number of initial applications should increase by 10 thousand, and repeated ones by 3 thousand. Also, sales of new houses are likely will be reduced by 2.8%.

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After reaching the value of 1.1142, the euro/dollar currency pair slowed down, resulting in an estimated flat to 1.1140/1.1170. It is likely to preserve fluctuations in these frames with a careful analysis of the boundaries.

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The pound/dollar currency pair continued to delight traders downward movement, reaching as a result of the support level of 1.2620. It is likely to assume a primary stagnation is formed with a subsequent attempt to correct the quote due to a strong oversold within this level.

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Trading recommendations for the GBPUSD currency pair - placing trading orders (May 23)

For the last trading day, the currency pair pound / dollar showed volatility which is almost equal to the average daily 95 points, as a result of maintaining the downward interest in the market. From the point of view of technical analysis, we have a complete coincidence of the previously laid out forecast. The quote has kept its bearish interest in the market, and reaches the support level of 1.2620. What do we have in general? The strongest decline since May 6, having to this day more than 540 points of progress. I will note, without any significant correction. Oversold goes off scale, and many traders will agree with this, but the negative information background in Britain is so wide that the market does not even have time to go into a banal technical correction. No matter how bad things are around Britain and the growing oversold, speculators feast on, since all this confusion makes it possible to ride on strong movements.

Now, let's move on to the information and news background which has been holding us for a long time. Yesterday, there was data on inflation in the United Kingdom, where they expected acceleration from 1.9% to 2.2%. As a result, there was still an increase, but by 2.1%. The news is, of course, positive for Britain, but the topic of Brexit still covers the entire existing news stream. Thus, the information background continues to delight the speculators. This time there was a news that the leader of the House of Commons of the United Kingdom, Andrea Leadsom, resigned because of the disagreement with the position of Prime Minister Theresa May on Brexit. In her statement, she wrote about a big discrepancy in visions with Theresa May, specifically on the procedure of leaving the UK from the EU. In turn, the media actively procrastinating appeared rumor about the resignation of Theresa May this week. From hearing the rumor, we have is that the Prime Minister may declare resignation from his post after her scheduled meeting on Friday with Graham Brady, the head of the 1922 Committee, which brings together rank and file MPs-Tory and determines the questions of selecting or changing the party leader.

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Today, in terms of the economic calendar, we have statistics on new home sales in the United States, where they expect a decline from 692K to 675K, and there will also be initial applications for unemployment benefits, which has a growth prediction from 212K to 215K. The US news is not entirely good, and they could put pressure on the US currency, but do not forget about the general information background, which puts a lot of pressure on the pound.

Further development

Analyzing the current trading chart, we see that the quotation maintains a downward interest in the market, trying to get below it. From the logical point of view, quotations need to be corrected due to substantial oversold, but this is from the point of view of logic, and not reality. For this reason, the primary thing that can be considered is the possible slowdown within 1.2590 / 1.2640, then we can analyze the behavior of the quote. If the inertial move continues, I do not exclude a further decrease to 1.2500.

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Based on the available data, it is possible to decompose a number of variations. Let's consider them:

- We consider buying positions in case of loss of bearish interest at the current stage and price fixing higher than 1.2640, with the prerequisite of working off the level, analyze on a shorter time frame.

- Positions for sale, if they will be added, so in the case of fixation lower than 1.2590, with a prospect of 1.2500, which is the first point.

Indicator Analysis

Analyzing a different sector of timeframes (TF), we see that the indicators in the short, intraday and medium term, persist a downward interest on the general background of the market.

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Weekly volatility / Measurement of volatility: Month; Quarter; Year

Measurement of volatility reflects the average daily fluctuation, based on monthly / quarterly / year.

(May 23 was based on the time of publication of the article)

The current time volatility is 61 points. It is likely to assume that in the case of preservation of the information background, the volatility will remain at a high level.

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Key levels

Zones of resistance: 1.2620; 1.2770 **; 1.2880 (1.2865-1.2880) *; 1.2920 *; 1.3000 **; 1.3180 *; 1,3300 **; 1.3440; 1.3580 *; 1.3700

Support areas: 1.2620; 1,2500 *; 1.2350 **.

* Periodic level

** Range Level

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Markets go into the red zone again. Will the yen take a chance?

Panic sales are again on the agenda. If the decline in the US stock indices is still insignificant, the S&P 500 declined on Wednesday by 0.28%. Consequently, Asian sites are falling much more pronounced. The Nikkei is losing by 0.7%, the Shanghai Composite by more than 1%, the July futures for Brent have come close to $70 per barrel and Europe has also opened with a decline.

The reason is the further escalation of the trade war, which is on the verge of going global. Japan and the UK have joined the Huawei boycott, and the US is planning to expand the list with another 5 companies from the Chinese technology sector.

Markets prefer not to notice a change in the direction of cash flows, but these changes are quite significant. From the monthly reports of the US Treasury, it follows that foreign investors are withdrawing from the US stock market and from US Treasures, preferring either corporate bonds or withdrawal to other markets. Russia has long reduced its investment in US T-bills to a minimum, but this step is largely due to political, not economic motives. At the same time, the two largest buyers of American debt, Japan and China, are also gradually reducing their investments in treasures but this process is still poorly pronounced.

By the end of 2018, the balance of the National Bank of China were US bonds in the amount of 1.12 trillion dollars or 28% of the total foreign debt holders. China has always stated that investing in the US national debt is necessary to prevent excessive weakening of the yuan. However, if the trade war develops, and the matter goes, then China is fully capable of making a decision on additional easing. In this case, they no longer need to hold significant reserves in treasures.

Japan has a little less than 1.03 trillion or 25.7% in December 2018. In analyzing the cash flows of Japanese investors, Bank Mizuho notes that investments in US government securities grew steadily until Trump was elected as president. But from 2016 onwards, there is a reverse process as Japanese investors are actively looking for alternative allocation of their capital.

Of course, the threat of a sovereign default by the United States is still beyond the possible scenarios but serious measures are needed to prevent it. Some of them are taking the administration of Trump ultimately because the trade war should contribute to the growth of profits of American corporations and control of sales markets, which forms the revenue side of the budget.

However, in the event of a further escalation of trade wars, the purchase of US government debt will be increasingly an internal affair of the United States. This is a very dangerous trend since it will contribute to the de-dollarization of the world economy, and therefore, the United States should not allow developments in this direction since the threat of default in this case from the hypothetical will become obvious.

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The threat of rising panic leads to an increase in demand for defensive assets, which include the Japanese yen. Preliminary GDP data for Q1 turned out to be noticeably better than forecasts, in March, orders for machine-building products increased and in many respects, the success of the Japanese economy was a consequence of the trade war. Japan takes advantage of the moment amid a deterioration in the position of Chinese exporters.

At the same time, the industrial PMI in the manufacturing sector in May at the level of 49.6p, which is slightly worse than the April 50.2p, while the negative trend is also at production prices.

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The latter factor is negative for GDP as it indicates a decrease in inflationary pressure, but positive from the perspective of the yen.

Tensions will increase by the end of the week. China has already sharply criticized the decision of the United States to increase pressure on the Chinese technological factor. Any response from China could provoke a collapse in stock markets and a fall in commodity prices, leading to a fall in commodity currencies and an increase in demand for bonds, gold, and the yen.

The maximum of USDJPY of May 21 at the level of 110.67 will stand in the coming days. It is more logical to use growth attempts for sales. The immediate goal is to go below the support of 110.10/15 ad the second goal is 109.80 with the prospect of a move to 109.00.

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Burning forecast EURUSD 05/23/2019

On Thursday morning, sellers pushed the EURUSD rate near the support area of 1.1110 - 1.1130 - at the time of 7:40 London time. The euro showed a low of 1.1133

The picture looks like an attempt to break down is inevitable.

The Fed's "minutes" came out on Wednesday - reports from the last Fed meeting showed that rates would remain unchanged for a long time, the Fed is concerned about low inflation.

The British pound continued to fall, reaching 1.2604 - on continuing uncertainty around Brexit - and now around the likely resignation of Prime Minister May.

We are ready to sell the euro at a break of 1.1130 downwards, however:

We are ready to buy the euro from 1.1190

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Indicator analysis. Daily review for May 23, 2019 for EUR / USD and GBP / USD currency pairs

On Tuesday, the market in both currencies moved down.

For the pair GBP / USD, the price moved down confidently, testing the rollback level of 76.4% - 1.2662 (blue dashed line).

For the EUR / USD pair, it moved down in the side channel, tested the support line - 1.1150 (blue bold line) once again. The question of breaking through this support line is still open. On Wednesday, strong calendar news come out at 6.00, 7.30, 8.00 (euro), 8.30 (pounds), 11.30 (euro), 14.00 (dollars) Universal time.

EUR / USD pair

Trend analysis (Fig. 1).

Today, the price after testing the support line 1.1150 (blue dotted line), can continue to move down with the target of 1.1125 - the lower border of the Bollinger Line indicator (black dotted line), and go further with its downward movement with the target of 1.1112 - lower fractal.

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Fig. 2 (daily schedule).

Comprehensive analysis:

- indicator analysis - down;

- Fibonacci levels - down;

- volumes - down;

- candlestick analysis - up;

- trend analysis - down;

- Bollinger lines - down;

- weekly schedule - down.

General conclusion:

On Thursday, we are waiting for the continuation of the downward movement. The first lower target of 1.2578 is the lower border of the Bollinger Line indicator (black dashed line).

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GBP/USD: plan for the European session on May 23. The resignation of the leader of the House of Commons was a blow to the

To open long positions on GBP/USD you need:

Yesterday's resignation of the leader of the House of Commons hit the pound positions, but buyers have a chance for a correction. This requires a quick return to the resistance level of 1.2670, from which you can count on the demolition of a number of sellers' stop orders and a larger increase in GBP/USD in the resistance area of 1.2730 and 1.2789, where I recommend taking profits. In the event of a further decline, according to the trend, it is best to consider purchases under the condition of a false breakdown in the support area of 1.2612 or to rebound from the lows of 1.2564 and 1.2500.

To open short positions on GBP/USD you need:

Breakthrough and consolidation below the support of 1.2612 will lead to a new wave of short positions in GBP/USD with a rise to the lows of 1.2564 and 1.2500, where I recommend taking profits. Under the pound growth scenario in the first half of the day, after the release of retail sales data, selling from a resistance of 1.2670 will be a more optimal scenario, provided there is a false breakdown there, or to rebound from a high of 1.2730. Any positive news on Brexit will lead to a sharp and strong growth of the pound, so do not forget about the placement of stop orders.

Indicator signals:

Moving averages

Trading is below 30 and 50 moving averages, which indicates the bearish nature of the market.

Bollinger bands

Volatility has decreased, which does not provide signals for entering the market.

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Description of indicators

  • MA (moving average) 50 days - yellow
  • MA (moving average) 30 days - green
  • MACD: fast EMA 12, slow EMA 26, SMA 9
  • Bollinger Bands 20
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AUDUSD: certain pullbacks before further USD gains? May 23, 2019

The AUD/USD pair has come under bearish momentum recently pulling the price towards 0.6850 support area.

The Australian dollar has weakened against the greenback after the RBA possible decision to cut key rate next month. A cut would be the first in almost three years for the Reserve Bank of Australia. Last time, The RBA eased policy to a record low 1.50% was in August 2016. According to Governor Phillip Lowe, a lower cash rate would support employment growth and bring forward the time when inflation is consistent with the target. The RBA's concession that easier policy is required comes as labor market slack remains and amid persistent evidence that households are reining in spending and slowing the economy. Unemployment climbed to 5.2% in April and inflation in the first three months of this year was tepid.

The RBA's dovish tilt comes as growth in Australia's $1.3 trillion economy sputters. At the same time, inflation has remained under the RBA's 2-3% target band. Recently Australian Prime Minister Scott Morrison met with RBA Chief Lowe to discuss about the slowing economy and how to improve it. Morrison's Liberal National coalition promised immediate tax cuts for 10 million middle- and low-income earners - worth up to A$1,080 ($746.28) per person. Australia's crumbling housing market, where prices are down almost 10% from their 2017 highs, is also dragging on the economy.

The Australian construction sector published a report where an increase to -1.9% from -2.1% was indicated. The Australian Flash Manufacturing PMI report was published as well where the growth to 51.1 from 50.9 was presented. The Flash Services PMI showed a rise to 52.3 from 50.1.

The US economic growth beat expectations in the first quarter but later started to show signs of a slowdown. Existing home sales, which make up for about 90% of all home sales in the United States, slipped in April for the second straight month. The greenback managed to gain momentum following the US FOMC meeting minutes. The US Fed officials agreed that their current patient approach to setting monetary policy could remain in place for a certain period where policymaker see little need to change rates in either direction. By controlling short-term rates, the Fed hopes to influence the broader economy to maximize employment and keep inflation near its target. Recent weak inflation was viewed by many participants as to be transitory, while risks to financial markets and the global economy had appeared to ease - a judgment rendered before the Trump administration imposed higher tariffs on Chinese goods and took other steps that intensified trade tensions.

Today, the US Jobless Claims report is going to be published. The reading is expected to grow to 215k from 212k. The New Home Sales figure is expected to drop to 678k from 692k. The Flash Manufacturing PMI is expected to surge to 53.0 from 52.6. The Flash Services PMI might reach 53.6 from 53.0.

The US dollar is the strongest currency in the pair. However, the Australian dollar is likely to gain ground if positive economic data is provided.

Now let us look at the technical view. The price has been quite non-volatile with the recent bearish momentum which formed Bullish Divergence. As the price consolidates above 0.6850 area, certain bullish momentum is expected to reach the dynamic level of 20 EMA in the process before the price continues lower with the downtrend. As the price remains below 0.70 area with a daily close, the bearish bias is expected to continue.

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EUR/USD: plan for the European session on May 23. European Parliament elections will begin today

To open long positions on EURUSD you need:

Volatility is very low, and, most likely, the pressure on the euro will continue. From a technical point of view, nothing has changed from yesterday. It is best to return to long positions after updating a large support level at 1.1143, provided that a false breakdown is formed there, or to rebound from a new low of 1.1112. The main goal of the bulls will be to consolidate above the resistance of 1.1166, where you can expect to form an upward correction with a return to a high of 1.1187, above which you can reach the resistance of 1.1205, where I recommend to lock in the profit.

To open short positions on EURUSD you need:

Sellers are required to return to a support of 1.1143, which will be the first signal to open short positions in EUR/USD based on maintaining the downward momentum and updating major support levels in the area of 1.1112 and 1.1079, where I recommend taking profits. If the euro rises in the first half of the day and consolidates above the resistance of 1.1166, it's best to return to short positions after updating the high of 1.1187 and 1.1205.

Indicator signals:

Moving averages

Trade is conducted in the region of 30 and 50 moving averages, which indicates market equilibrium.

Bollinger bands

Volatility is very low, which does not provide signals for entering the market.

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Description of indicators

  • MA (moving average) 50 days - yellow
  • MA (moving average) 30 days - green
  • MACD: fast EMA 12, slow EMA 26, SMA 9
  • Bollinger Bands 20
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Technical analysis of GBP/USD for 23.05.2019

Technical Market Overview:

After the big Pin Bar candlestick with a high at the level of 1.2811 (Fakey) on the GBP/USD market, the bears have again pushed the prices lower towards the level of 1.2614. It means the bulls are still too weak to start any meaningful upward correction and the move down continues despite extremely oversold conditions. The next target is seen at the level of 1.2529.

Weekly Pivot Points:

WR3 - 1.3212

WR2- 1.3121

WR1 - 1.2880

Weekly Pivot - 1.2790

WS1 - 1.2532

WS2 - 1.2453

WS3 - 1.2198

Trading Recommendations:

The best trading strategy in the current market conditions is to sell the local pull-backs with a tight protective stop loss. Due to the oversold market conditions please pay attention to the candlestick trend reversal patterns and market trend reversal patterns. The next target for bears is seen at the level of 1.2529.

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

Technical analysis of GBP/USD for 23.05.2019

Technical Market Overview:

After the big Pin Bar candlestick with a high at the level of 1.2811 (Fakey) on the GBP/USD market, the bears have again pushed the prices lower towards the level of 1.2614. It means the bulls are still too weak to start any meaningful upward correction and the move down continues despite extremely oversold conditions. The next target is seen at the level of 1.2529.

Weekly Pivot Points:

WR3 - 1.3212

WR2- 1.3121

WR1 - 1.2880

Weekly Pivot - 1.2790

WS1 - 1.2532

WS2 - 1.2453

WS3 - 1.2198

Trading Recommendations:

The best trading strategy in the current market conditions is to sell the local pull-backs with a tight protective stop loss. Due to the oversold market conditions please pay attention to the candlestick trend reversal patterns and market trend reversal patterns. The next target for bears is seen at the level of 1.2529.

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

Technical analysis of EUR/USD for 23.05.2019

Technical Market Overview:

The EUR/USD market keeps trying to break through the technical resistance zone located between the levels of 1.1167 - 1.1174, but no avail so far. There were some attempts to rally but were quickly capped by the bears. The short-term outlook remains bearish and there is no signs or any trend reversal for now. The market is biased to the downside despite extremely oversold conditions. The next target for bears is seen at the level of 1.1135 and 1.1111.

Weekly Pivot Points:

WR3 - 1.1317

WR2- 1.1287

WR1 - 1.1208

Weekly Pivot - 1.1178

WS1 - 1.1099

WS2 - 1.1069

WS3 - 1.0986

Trading Recommendations:

The best trading strategy in the current market conditions is to sell the local pull-backs with a tight protective stop loss. Due to the oversold market conditions please pay attention to the candlestick trend reversal patterns and market trend reversal patterns. The next important technical support is located at the level of 1.1111 and this is the next target for bears.

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Technical analysis of Ethereum for 23.05.2019

Crypto Industry News:

According to TASS, the Central Bank of Russia believes that the bill regulating cryptocurrencies is sufficiently prepared to be adopted in spring 2019.

Olga Skorobogatova, the first deputy governor of the Russian central bank, said that the bank expects the adoption of the "On Financial Financial Assets" (DFA) cryptographic act during the spring session in 2019 in line with the order of President Vladimir Putin.

Speaking at a recent parliamentary meeting, Skorobogatova argued that DFA, as well as the bill on crowdfunding and other cryptographic accounts, were "sufficiently prepared" to be adopted during the session. She also stressed that all bills are "crucial for the country and will allow the implementation of new projects". In turn, the Russian prime minister and former president Dmitry Medvedev recently said that cryptographic regulation is not a priority for the Russian authorities, because the crypto "lost its popularity".

Yesterday, the chairman of the Financial Market Committee in the Russian parliament revealed that the Russian authorities had to postpone the second reading of DFA due to the commission of the Financial Action Task Force on Money Laundering (FATF).

While the FATF obliged Russia to set up major industry terms such as "cryptocurrencies" and "Bitcoin", the Russian central bank allegedly influenced lawmakers to avoid taking into account certain deadlines in the bill.

Technical Market Overview:

The ETH/USD pair has broken below the short-term trend line support around the level of $240 and made a new local low on its way down at the level of $235.63 The next technical support is seen at the level of $226.17. .After the corrective cycle in wave 4 is completed, there is still one more wave up missing in order to complete the whole impulsive wave.

Weekly Pivot Points:

WR3 - $390.48

WR2- $336.28

WR1 - $299.99

Weekly Pivot - $239.34

WS1 - $205.35

WS2 - $147.46

WS3 - $113.47

Trading Recommendations:

The best trading strategy in the current market conditions is to buy the local pull-back as wave 4 is in progress in anticipation of the wave 5 to the upside. It might take some time for the wave 4 to complete, so it does not have to be a day-trading strategy. Please pay attention to the technical support at the level of $226.17 as any violation of this level will accelerate the sell-off towards the next technical support at the level of $212.12.

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Elliott wave analysis of GBP/JPY for May 23, 2019

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GBP/JPY failed to build on its temporary breakout above resistance at 140.51 which is disappointing. The breakout below support at 139.63 indicates the renewed downside pressure and a possible decline to the 61.8% corrective target at 137.53 before the wave 2 finally completes.

At this point, only a direct breakout above minor resistance at 140.32 will indicate the wave 2 being complete, while a breakout above resistance at 141.13 will confirm that the wave 3 is taking over for a rally towards 151.50.

R3: 141.48

R2: 140.77

R1: 140.32

Pivot: 140.00

S1: 139.29

S2: 138.90

S3: 138.25

Trading recommendation:

Our stop at 139.60 has been hit for a 20 pip loss. We will look for a new buying opportunity at 137.75 or upon a breakout above 140.32

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Elliott wave analysis of EUR/JPY for May 23 - 2019

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We continue to expect minor support at 122.65. If it comes true, we will be able to protect the downside for the next impulsive rally higher towards 129.35. In the short-term, we need a break above minor resistance at 123.11 and more importantly a break above resistance at 123.45 to confirm the next impulsive rally higher to 125.22 on the way higher to 129.35.

Only an unexpected break below 122.65 might distort our bullish outlook and call for renewed downside pressure to 122.06 and likely below.

R3: 123.68

R2: 123.43

R1: 123.11

Pivot: 122.82

S1: 122.65

S2: 122.26

S3: 122.06

Trading recommendation:

We are long EUR from 122.25 with our stop placed at 122.60.

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