Red Monday: commodity currencies are falling, AUD and NZD are preparing to test multi-year lows

The failure of US-Chinese trade talks and President Trump's intention to impose a 10% tariff on Chinese goods worth $300 billion starting September 1, triggering markets' strong backlash. Oil prices are dropping by more than 1% on Monday morning. The Chinese Central Bank has been depreciating the renminbi since 2018 and Asian exchanges are trading in the red zone.

The deterioration of the situation has serious pressure on commodity currencies.

NZD/USD pair

The outlook for New Zealand's economy looks increasingly bleak at the same time, the worse the macroeconomic indicators are published, this gives a higher likelihood of an aggressive reduction in the rate of the RBNZ.

The ANZ business confidence index fell by 6 percentage points in July, while 44% of respondents said they expected deterioration in the general business environment in the coming year. The expectations of firms regarding their own activity fell to 5p, despite the fact that the rise was predicted.

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Economic changes are also there, and they are negative. The number of firms expecting a reduction in employment has increased and the capacity utilization, which has a good correlation with GDP growth rates, has fallen by 5 points to zero that has been the lowest since 2009. As a result, forecasts for GDP growth worsen.

Most companies expect a decline in profitability by 42%, adjusting downward forecasts for profits. They are confident that credit conditions will worsen in the future and the lowest figure since 2009. Inflation expectations fell to 1.8 in July while only 1% of firms expect export growth.

The volume of residential and commercial construction is sharply declining. Expectations for profitability in the sector have been at a minimum since 2009 and overall, the outlook for the growth of the New Zealand economy is deteriorating. Despite the fact that prices for dairy products are still at good levels, fears of a relative global slowdown prevail.

In the current conditions, the RBNZ is likely to look for ways to stimulate the economy in the coming months. While the Fed's intentions regarding further rate cuts are still vague, there is a clear consensus on the RBNZ for two rate cuts in the current year.

Kiwi came close to the support of 0.6482, and the chances of a breakdown and movement towards 0.6442 are high. Technically, before the breakthrough, a rollback to the resistance of 0.6570 is possible, however, it is more logical to use any growth attempts to enter short positions.

AUD/USD pair

The Australian dollar is under severe pressure as expectations of a global slowdown have a serious negative effect on commodity currencies. Lowering the rate of the Fed and the failure of trade negotiations between the US and China only reinforce the negative dynamics, but they are not the reason.

On Tuesday, the RBA will hold a monetary policy meeting and given the fact that the RBA has consistently mitigated conditions from 2011 by lowering the rate from 4.75% to 1%, one would expect a reaction to the deteriorating external conditions. However, the markets seem to adhere to a different principle - "not this time". Indeed, despite a marked deterioration in external conditions, the main macroeconomic indicators, primarily inflation, look stable and do not require an immediate response.

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World prices for raw materials are still high and stimulating exports. Meanwhile, the rise in oil prices has led to higher prices for gasoline, which supports inflation and offsets rather weak domestic demand. Inflation in Q2 amounted to 1.6%, higher than in Q1, which means that the RBA is able to refrain from another rate cut.

It should also be noted that in Q2, export prices grew faster than import prices, which supports the industrial sector. The low rate of the AUD has played a certain positive role in this, and if the RBA does not see the danger of its growth in the short term, then this is another factor in favor of the fact that it is not necessary to reduce the rate on Tuesday.

Thus, the Aussie can react in a short-term way with growth to the results of the RBA meeting, returning to resistance 0.6830/40. At the same time, there is no basis for sustainable growth, and in the longer term, a test of support of 0.6747 and a withdrawal below seem inevitable.

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Prospects for gold in August and September

After Fed Chairman Jerome Powell announced that the Open Market Committee did not expect a mitigation cycle, and the rate reduction was a one-time action, US stock indices began to decline actively. This supported precious metals, despite the rise in the dollar, updating its two-year maximum, which soon lost its fighting spirit, and ultimately can be qualified as a false breakdown. However, the dollar will not be discussed in this article, but gold. Therefore, let us consider the fundamental factors affecting the price, for which we use the data of the World Gold Council - World Gold Council and the US Commodity Futures Commission - CFTC.

According to the World Gold Council, total demand for gold amounted to 1,123 tons in the second quarter of 2019, which is 8% higher than last year. At the same time, in the first half of the year, demand for gold jumped to a three-year high and amounted to 2182 tons, which was mainly due to record purchases of central banks and ETF trading funds, and is especially important from the point of view of price growth potential. Also, in the second quarter, assets secured by gold ETF increased by 67.2 tons, to a six-year high, and amounted to 2548 tons. The main factors affecting the growth of purchases were persistent geopolitical instability. The expectation of lower interest rates of the US Federal Reserve and the rise in gold June has reached multi-year highs.

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Moreover, the price of gold received support from the Indian jewelry market, which survived the recovery. However, investments in bars and coins decreased by 12% to 218.6 tons in the second quarter. In turn, the decline in the Australian dollar led to an increase in production profitability in one of the most important regions, which led to an increase in supply by 6%.

Despite the fact that the demand for jewelry is about half of the total consumption, in my opinion, the most important factors affecting the price of gold is the demand from the North American exchange trading funds, they are also ETF, as well as the positioning of traders on the COMEX-CME exchange. It was the purchases of exchange-traded funds from the United States and Europe that contributed to the increase in prices in June. Yet, in July, the gold quotes went into the range. At the moment, we have no data on purchases made by ETF in July since they will appear a little later, but we have data from the commission on US commodity futures - CFTC, on the positions of traders on the stock exchange (Fig. 1). This data is the most timely source of fundamental information about market positioning.

Let's consider the Disaggregated COT Report report submitted by traders to the US Commodity Futures Commission. As follows from the report, Open Interest of traders for the previous reporting week decreased by 11%, to 965 thousand contracts. This is not a very good signal for price growth, but the decline could have been due to a rise in the US dollar exchange rate at the beginning of last week, which is reflected in the report and is published on Friday as Tuesday - Tuesday. However, for us, which category of traders left the market is the most important?

The answer to this question is given by diagrams of long and short positions of participants in this market. The CFTC classifies traders according to their functions, which allows us to understand who the main seller is and who is the buyer, and based on this, build a forecast for future price movements. Speculators (Money Manager) are a priori buyers, while operators (Producer) are sellers. The increase in volatility attracts not only speculators to the market, but also operators who insure their risks. Another category Swap Dealer takes a position on the situation, although it is counted among the CFTC sellers.

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Figure 1: Visualization of the report on the obligations of traders

Following from the COT report, only one category of traders, the so-called Producer or operators insuring their cash gold positions, left the market. Reducing the short positions of the Producer group may ultimately lead to a general decline in prices, such as, for example, in 2017 and 2018. But then, they did not have so many unusual long positions. Now, their long positions have been at their highs since 2014. Therefore, we can assume that there was a fixation on the threshold of the Fed meeting. Moreover, the price of gold was in the range before this three weeks, which resulted in a decrease in volatility, and the need for insurance from them disappeared.

In my opinion, the most important role for the rise in the price of gold is played by Money Manager positions - speculators, who are, by definition, buyers earning on the movement of quotes. Price can not rise if buyers do not buy gold. As can be seen from the diagram, the long positions of the speculators again approached their highs, which indicates the upward trend vision of this category of bidders.

At the moment, the December contract is the most liquid, with a price of $ 1,452, which is $12 higher than in the cash market. Thus, looking at the positions of speculative traders on the COMEX-CME exchange, we can assume that they are counting on a further increase in the price of gold.

In addition to analyzing trader positions, we will look at the seasonality of the market over the previous 20 years (Fig. 2). As follows from the chart of seasonality of gold, in the period August-September, the price on average increased seasonally. There were exceptions to this rule when the price was in the range and even decreased, but the weighted average curve shows a total increase. A similar picture is observed in the 10-year period of time. At the same time, over a period of 5 years in August-September, the price of gold was in the range, but the previous five years cannot be called successful for gold, which was depressed due to the policies of central banks and general financial regulation.

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Fig.2: Seasonal price chart of gold

Now, the gold paradigm is changing before our eyes - central banks are actively buying an alternative to the US dollar, and gold itself seems to be losing its correlation with the dollar again. Since August 2018, gold has increased in price by 20% against the dollar, while the dollar itself has grown by 4% against a basket of foreign currencies. Earlier, gold was close to the US dollar for about two years, while the negative correlation reached -0.95.

Summing up my reasoning, I would like to note the following: from a fundamental point of view,, traders can expect a rise in the price of gold in August-September. However, when making decisions to buy, they should be guided by the price chart at InstaForex terminals and signals from their own trading system. No one knows the future, thus, we should be careful.

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EUR/USD approaching resistance, potential drop!

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EURUSD is approaching our first resistance at 1.1123 where we might be seeing a drop below this level.

Entry: 1.1123

Why it's good : 100% Fibonacci extension, 23.6% Fibonacci retracement, horizontal pullback resistance

Stop Loss : 1.1183

Why it's good : horizontal overlap resistance

Take Profit : 1.1029

Why it's good: Horizontal swing low support, 100% Fibonacci extension

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AUD / USD: Aussie in a knockout, the results of the RBA meeting may exacerbate the situation for Aussie

Despite the general weakening of the US dollar, the AUD/USD pair the price tested a multi-year low of 0.675 in today's Asian session, which reflects the general pessimism of the pair. Although the downward impulse did not receive its continuation, the "Aussie" is under strong pressure from the fundamental background on the eve of the next meeting of the Reserve Bank of Australia, which will take place tomorrow.

The devaluation of the Australian dollar is due to several reasons. They can be divided into two parts, although they are certainly interrelated. The external fundamental background influences the dynamics of Australia's key macroeconomic indicators. First of all, we are talking about the escalation of the trade war between the United States and China. Recent events suggest that the parties will not come to a consensus in the foreseeable future and will not sign a historic deal. This means that the central banks of the leading countries of the world will remain in the path of easing the parameters of monetary policy, and the RBA in this context will not be an exception.

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Let me remind you that the Australian regulator has already reduced the interest rate twice this year, but at the same time did not rule out another step in this direction until the end of the year. Global trade conflict increases the likelihood of a given scenario. During the last speech of the head of the RBA, Philip Lowe, focused his attention on three aspects, namely uncertainty about the growth of the global economy, weak inflation in Australia and the ambiguous situation in the labor market (weak growth in wages and high levels of part-time employment).

It is worth noting that inflation in the second quarter showed signs of recovery. According to the latest published data, the consumer price index rose to 1.6% (with a forecast of 1.5%) in annual terms and to 0.6% on a quarterly basis (with a forecast of 0.5% and the previous value of 0%). Although the published figures turned out to be slightly better than expected, the trend itself is important here - in particular, the figure rose in annual terms for the first time after a three-quarter decline.

However, such a "measured" growth dynamics did not satisfy the head of the Australian regulator. He stated that the Reserve Bank of Australia is ready for further policy easing in order to return inflation to its target range from 2% to 3%. Given this "announcement", traders of the pair should not expect tomorrow's "hawkish" notes. The overwhelming majority of experts do not expect any steps of the RBA at the August meeting but almost 100% sure about the September decline. I suppose tomorrow the members of the Central Bank will confirm these forecasts and announce an easing of monetary policy in the fall. If they limit themselves to just such a forecast, then the decrease in AUD/USD will be limited (a correctional pullback is also possible) since this scenario is already largely taken into account in prices.

Today's macroeconomic releases also exacerbated the already sad fundamental picture for the AUD/USD pair. Thus, the activity index in the service sector from AiG (Australia's PMI equivalent) collapsed again under the key 50-level mark and reached 43.9 points. From January to April, the indicator went below this target, then it went out at the level of 53 points for two months and now, it shows the deterioration of the situation again.

In addition, today another disappointing data from the Middle Kingdom was published, which again reminded the market of the slowdown of the world's largest economy. Thus, the index of business activity in the services sector from Markit (Markit Services PMI) fell sharply in July, reaching 51.6 points. Over the previous three months, this indicator went on within the framework of 52 points, which is why such a sharp and most importantly unexpected a downward jump compared to the forecast at the level of 52.5 points. This had an impact on the dynamics of today's trading. The Australian dollar is most sensitive to the decline in Chinese indicators since China is the main trading partner of the Green Continent.

Thus, the Aussie is under the yoke of a negative fundamental background. The escalation of the trade war, as well as almost 100% market confidence in reducing the interest rate of the RBA at the September meeting, put pressure on AUD/USD pair. Some experts now admit the option of reducing the rate to 0.5% by the spring of next year. If the Australian regulator doesn't rule out such a scenario tomorrow, Ozzy will go to the final knockdown.

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Technically, the picture is fully consistent with the foundation. On the daily chart, the price is on the bottom line of the Bollinger Bands indicator (which in turn is in the extended channel) and under the Kumo cloud. In addition, the Ichimoku Kinko Hyo indicator has formed a "Parade of Lines" bearish signal, and the MACD oscillator shows a strong oversold condition. All of the above clearly indicates the priority of the southern long-term movement with a price target of 0.6620, which is the bottom line of the Bollinger Bands indicator on the monthly chart. In turn, the closest resistance level is at the of 0.6880 mark, which is where the stop can be located and the Tenkan-sen line on D1.

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AUD/USD broke out of its major support!

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Price broke out of its major support-turned-resistance where we expect to see a further drop to its next support at 0.6710.

Entry: 0.6831

Why it's good : Horizontal pullback resistance

Stop Loss : 0.6870

Why it's good : 38.2% Fibonacci retracement, horizontal pullback resistance

Take Profit : 0.6710

Why it's good: 100% Fibonacci extensionanalytics5d47d098d440f.png

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USD/JPY reaching support, potential bounce!

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USDJPY is testing our first support at 105.77 where we are expecting a bounce up this level.

Entry :105.77

Why it's good : 78.6% Fibonacci retracement, 61.8% Fibonacci extension*2, horizontal swing low support

Take Profit : 107.22

Why it's good : horizontal overlap support, 38.2% Fibonacci retracement, 61.8% Fibonacci extension

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USD/JPY reaching support, potential bounce!

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USDJPY is testing our first support at 105.77 where we are expecting a bounce up this level.

Entry :105.77

Why it's good : 78.6% Fibonacci retracement, 61.8% Fibonacci extension*2, horizontal swing low support

Take Profit : 107.22

Why it's good : horizontal overlap support, 38.2% Fibonacci retracement, 61.8% Fibonacci extension

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Burning forecast for EUR/USD on 08/05/2019 and trading recommendation

After the final data on the index of business activity in the manufacturing sector of the United States showed a much better result than the preliminary assessment, many hope that a similar thing could happen with the business activity index in the service sector, as well as with the composite index of business activity. Moreover, the preliminary data and so has shown growth. Thus, there is a possibility that the growth of business activity will be much more significant than originally expected. According to preliminary forecasts, the dollar has serious grounds for growth.

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The EUR/USD pair, after an impressive downward move, came very close to the psychological level of 1.1000, where it felt support and moved to a correction stage. Analyzing the trading chart in general terms, we see that the corrective move has returned us to the area of the previously formed cluster of 1.1120/1.1155, which in itself plays the role of a mirror level.

It is likely to assume that fluctuation within this range will lead to a stop and finding a periodic resistance level. In case the forecast is confirmed, there are prerequisites for restoring the original course. The considered coordinates for entry into short positions at the moment is 1.1095, with an estimated decrease to 1.1070--1.1000.

Otherwise, accumulation within 1,1120/1,1155, will continue until tomorrow.

From the point of view of the complex indicator analysis, we see that all smaller periods, including intraday ones, have turned to an upward direction, due to the correction phase. A deep time interval, the daily chart for example, retains a downward interest referring to the early inertial course. Working with indicators, it is worth considering that the current resistance will primarily affect the short-term periods, forming a stagnation in relation to which we will see changeable indicators that will confirm our previously derived theory.

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Technical analysis of ETH/USD for 05/08/2019:

Crypto Industry News:

The Chinese manufacturer of ASIC Bitcoin excavators, Bitmain, lost $ 625 million in the first two months of this year, according to a QQ report from August 2.

According to the report, the company suffered losses of USD 625 million in March, USD 345 in January and USD 280 million in February. These results were probably caused by the sale of obsolete 16-nanometer ASICs at low prices, and after the removal of stocks from these machines, new profits from the sale of new 7-nanometer mining platforms are expected.

It was estimated that the company's gross profit margin would reach 30% in April thanks to the sale of the aforementioned device. At the end of March, the company announced that its 9-nanometer excavator from the Antminer S17 series is to be launched on April 9.

Bitmain is planning to fundraise again, arguing that the cryptocurrency market has started to record profits again. The company was hoping to get $ 3 billion from the planned IPO in Hong Kong, but the latest report suggested that this fundraising goal would be reduced to between $ 300 million and $ 500 million if it was carried out in the United States.

The ETH/USD pair is trying harder to break out of the horizontal trading range located between the levels of $199.68 - $235.42. The recent move up above the local resistance located at the level of $228.04 has been made on a high volume and momentum, so the chances are good that it will at least test the level of $235.42. Please notice, that the corrective cycle in wave 2 of the higher degree might have been completed already.

Weekly Pivot Points:

WR3 - $260.89

WR2 - $241.83

WR1 - $232.61

Weekly Pivot - $214.73

WS1 - $206.31

WS2 - $187.76

WS3 - $178.82

Trading Recommendations:

The best strategy in the current market conditions is to trade with the larger timeframe trend, which is still up. All the shorter timeframe moves are being treated as a correction inside of the uptrend. The current cycle is wave 2 of the higher degree and it might have been completed, so the uptrend should resume sooner or later. We are waiting for a breakout above the level of $235.42 to confirm the bullish momentum.

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Technical analysis of BTC/USD for 05/08/2019:

Crypto Industry News:

From August 2019, Brazilian citizens are required to report their cryptographic transactions to the national tax authority, the Department of Federal Revenue (RFB).

Transactions with cryptocurrencies, such as Bitcoin, must be reported to the RFB in accordance with the rules set out in the 1888 normative manual introduced in May 2019. As reported by the national public agency Agencia Brasil, the new measure applies to individuals, companies and brokerage houses and covers all types of activities related to cryptography, including the purchase and sale of cryptocurrencies, as well as donations, barter, deposits, withdrawals and others.

Entities are to provide monthly reports by the end of each subsequent month if crypto transactions have taken place. According to the rules, local cryptographic exchanges will have to inform RFB about all operations regardless of value. However, those who use foreign exchanges, intermediaries or make peer-to-peer transactions in crypto, will have to report transactions if the monthly amount exceeds 30,000 Brazilian real ($ 7,800).

Penalties range from 1.5% to 3% of the amount of unreported transaction.

Those who do not report on cryptographic transactions will face penalties ranging from 100 to 500 realities in Brazil or from 25 to 130 dollars. According to Agencia Brasil, RFB is also authorized to collect from 1.5% to 3% of the amount of the unpaid transaction as a penalty.

RFB believes that the digital currency market in Brazil has more investors than the second oldest stock exchange in Brazil, B3, which reportedly has around 800,000 customers. The authority intends to combat illegal activities such as money laundering, tax evasion and financing of terrorism.

Technical Market Overview:

The BTC/USD pair has bounced from the level of $9,049 after the corrective cycle in the wave Z of wave 2 had been completed. The bulls have broken above all of the key technical resistance levels located at $10,166 and $11,068 and now are testing the 61% of the Fibonacci retracement of the lase wave down at the level of $11,548. The positive and strong momentum supports the short-term bullish outlook and if the level of $11,548 is violated, then the next target is seen at the level of $11,855.

Weekly Pivot Points:

WR3 - $13,750

WR2 - $12,333

WR1 - $11,817

Weekly Pivot - $10,382

WS1 - $9,882

WS2 - $8,441

WS3 - $7,9485

Trading Recommendations:

The best strategy in the current market conditions is to trade with the larger timeframe trend, which is still up. All the shorter timeframe moves are being treated as a correction inside of the uptrend. The larger degree WXY correction might have been completed and the market might be ready for another impulsive wave up.

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GBP/USD: plan for the European session on August 5. Demand for the pound is unlikely to continue without the support of good

To open long positions on GBP/USD you need:

Pound buyers made another unsuccessful attempt to raise the pound above the resistance of 1.2162, which keeps the pair in the channel for quite a long time and does not give the bulls how to start an upward correction. Weak data on the US labor market also did not lead to a consolidation above the resistance of 1.2162. At the moment, given that important reports on the UK will not be released today, the goal of bulls is to hold the level of 1.2083 in the first half of the day, the breakthrough of which will open a real opportunity to update the high of 1.2240, where I recommend to take profit. In case GBP/USD further declines, it is best to look at long positions from lows of 1.2040 and 1.1985.

To open short positions on GBP/USD you need:

Considering that important fundamental statistics on the UK economy is not set to be released today, sellers will wait for the next negative news on Brexit, which will again return GBP/USD to the support area 1.2083, a breakthrough of which will strengthen the bearish trend and lead to an update of lows of 1.2083 and 1.2040, where I recommend to take profit. If the bulls again attempt to push the pair upwards today in the first half of the day, the formation of a false breakdown in the resistance area of 1.2162 will be another signal for opening short positions. With the pound growing above the level of 1.2162, you can open short positions immediately from a high of 1.2240, which was formed at the beginning of last week.

Indicator signals:

Moving averages

Trading in the region of 30 and 50 moving averages, which indicates a short-term market uncertainty.

Bollinger bands

In case the pound declines, support will be provided by the lower limit of the indicator in the region of 1.2115, a breakthrough of which will increase the pressure on the pair. An upward correction will be limited by the upper line of the indicator in the area of 1.2185.

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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 05/08/2019:

Technical Market Overview:

The GBP/USD market still does not have enough upward momentum to break through the lower trendline boundary located around the level of 1.2220. The bears have pushed the prices lower again and the technical support at the level of 1.2118 will be tested soon. The lower boundary of the support zone located at the level of 1.2077 is the most important support for the short-term outlook in this pair. The momentum indicator remains weak nad negative, which, despite oversold market conditions, indicates a further possible spike towards the level of 1.1983. The trend is still down and there are no signs of a trend reversal yet.

Weekly Pivot Points:

WR3 - 1.2595

WR2 - 1.2485

WR1 - 1.2298

Weekly Pivot - 1.2184

WS1 - 1.1983

WS2 - 1.1676

WS3 - 1.0876

Trading Recommendations:

The best strategy for the current market conditions is to follow the larger timeframe trend. The larger time frame trend is still down and there are no signs of any trend reversal. The key long-term technical support at the level of 1.2420 has been violated and the next target for bears is seen at the level of 1.2100 and 1.1983. All the corrections are just the local correction inside of a downtrend.

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EUR/USD: plan for the European session on August 5. German and eurozone PMI data will support the euro, but demand is unlikely

To open long positions on EURUSD you need:

Euro buyers, amid weak data on the US labor market, continued to pull up the pair last Friday, reaching large resistance levels, which I paid attention to in my forecast. Currently, good PMI reports that are in fairly good condition can provide further support. The formation of a false breakdown in the support area of 1.1113 will be the first signal to open long positions, the purpose of which will be the resistance of 1.1152, where I recommend to take profits. When the scenario of pulling down the euro under the level of support 1.1113, for purchases it is best to look at the test of a larger support of 1.1079, where bulls will try to build the lower boundary of the new ascending channel.

To open short positions on EURUSD you need:

Sellers urgently need to return to the area below the support level of 1.1113, which was missed on Friday. Only in such a scenario will the pressure on the euro return, which will lead to a deeper downward correction in the area of a low of 1.1079 and 1.1054, where I recommend taking profits. If reports on the service industry turn out to be better than economists' forecasts, the euro may continue to grow. In this case, it is best to rely on large sellers to return to the market after the formation of a false breakdown in the support area of 1.1152, or on a rebound from a larger resistance of 1.1186.

Indicator signals:

Moving averages

Trading is conducted above 30 and 50 moving averages, which indicates an upward correction in the pair.

Bollinger bands

If the euro declines, support will be provided by the lower limit of the indicator in the 1.1090 area.

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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

Technical analysis of EUR/USD for 05/08/2019:

Technical Market Overview:

The EUR/USD pair has bounced from the level of 1.1034 and broke through the technical resistance located at the level of 1.1101. The local high was made at the level of 1.1130 and due to the neutral market conditions there is still a room for more upside. The next target for bulls is seen at the level of 1.1181 and the strong and positive bullish momentum supports this short-term outlook. The larger timeframe trend remains down and there are no signs of any trend reversal yet.

Weekly Pivot Points:

WR3 - 1.1304

WR2 - 1.1233

WR1 - 1.1170

Weekly Pivot - 1.1096

WS1 - 1.1037

WS2 - 1.0957

WS3 - 1.0876

Trading Recommendations:

The best strategy for the current market conditions is to trade with the larger timeframe trend, which is still down. The Ending Diagonal pattern has not been finished yet and the bears are in full control of the market. The longer-term target is seen at the level of 1.0814, from where the traders can expect a larger rebound.

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Elliott wave analysis of GBP/JPY for August 5 - 2019

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GBP/JPY is heading for the 127.93 target. We expect a bottom to form here and set the stage for a new impulsive rally that will take us much higher in the longer term. The first strong indication of a bottom being in place is a break above minor resistance at 130.23, while a break above resistance at 133.00 will be need to confirm that a long-term bottom is in place and a new impulsive rally is developing.

R3: 130.42

R2: 129.92

R1: 129.63

Pivot: 129.36

S1: 128.58

S2: 128.25

S3: 127.93

Trading recommendation:

We are looking for a buying opportunity at 128.05 or upon a break above 130.23

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Elliott wave analysis of EUR/JPY for August 5 - 2019

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EUR/JPY is closing in on the 117.47 target which could complete the decline from 127.50 and more important the decline in wave [E] from 148.87. Once wave [E] completes, a new impulsive rally should be expected.

The first good indication of a bottom being in place is a break above 118.92, but it will take a break above resistance at 121.38 to confirm that a long-term bottom is in place and a new long-term impulsive rally is developing.

R3: 119.17

R2: 11.92

R1: 118.48

Pivot: 118.24

S1: 117.65

S2: 117.38

S3: 117.00

Trading recommendation:

We will buy EUR at 117.60 or upon a break above 118.92.

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Technical analysis: Important intraday Level For EUR/USD, August 05,2019

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When the European market opens, some economic data such as Sentix Investor Confidence, Final Services PMI, German Final Services PMI, French Final Services PMI, Italian Services PMI, and Spanish Services PMI will be revealed. The US will release the economic data such as Loan Officer Survey, ISM Non-Manufacturing PMI, and Final Services PMI.So, amid the reports, EUR/USD will move in a low to medium volatility during this day.TODAY'S TECHNICAL LEVEL: Breakout BUY Level: 1.1161. Strong Resistance:1.1155. Original Resistance: 1.1144. Inner Sell Area: 1.1133. Target Inner Area: 1.1107. Inner Buy Area: 1.1081. Original Support: 1.1070. Strong Support: 1.1059. Breakout SELL Level: 1.1053. (Disclaimer)The material has been provided by InstaForex Company - www.instaforex.com

Technical analysis: Important Intraday Levels for USD/JPY, August 05, 2019

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Japan will not release any economic data today but the US will publish some economic data such as Loan Officer Survey, ISM Non-Manufacturing PMI, and Final Services PMI. So, there is a likelihood that the USD/JPY pair will move with a low to medium volatility during this day. TODAY'S TECHNICAL LEVELS: Resistance.3:106.68. Resistance. 2:106.47. Resistance. 1:106.26. Support. 1:106.01. Support. 2:105.80. Support. 3:105.59. (Disclaimer)

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Trading plan for EURUSD for August 05, 2019

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Technical outlook:

The EUR/USD pair has produced a counter-trend rally as it was expected and discussed last week. At the moment, the single currency pair is seen to be trading at 1.1118/20 levels after printing an intraday high at 1.1133 levels. Please note that it has tested the immediate resistance trend line and is expected to produce a bearish reaction. Also note that immediate price resistance is at 1.1162, followed by 1.1188 levels. Looking into the wave structure, the EUR/USD pair seems to be progressing into wave 3, after having completed the termination of waves 1 and 2 as depicted here on the 4H chart. Furthermore, also note that the Fibonacci 0.382 resistance levels of the recent drop between 1.1280 through 1.1026 levels have been tested and prices are dropping lower as we continue writing this article. The current price is seen to be at 1.1114 levels and producing a shooting star candlestick pattern on the above chart. It is an ideal strategy to initiate short positions with risk above 1.1280 levels. On the flip side, a break above 1.1162 levels would still find resistance close to 1.1200 levels.

Trading plan:

Remain short, stop at 1.1280, target is open.

Good luck!

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Forecast for USD / JPY pair on August 5, 2019

USD / JPY pair

The collapse of the USD/JPY pair in the last three days was directly related to the decline of the stock market by 2.69% (S&P500) after the Fed decided to lower the rate. The business media immediately blamed the hapless Powell for this, who got confused at his press conference with his own thesis and gave conflicting answers, to the extent that if the stock market fell further, the Fed would raise the rate. We do not associate the fall of the market with the Fed meeting, the situation is more like profit-taking prepared for this event as the fall of the stock market at a lower rate looks illogical. We saw a similar thing in May but even earlier in the 4th quarter of last year, when the massive outpouring of large players in the 3rd quarter led to a collapse of the market in the 4th quarter by 17% due to the crash of smaller players. The situation was rescued by the back-to-back from the new year of the buybacks of corporations, where companies purchase their own shares and now, the whole question is when these buybacks will resume. August is the middle of the quarter and it is not yet clear how investors want to complete it. Accordingly, the purchase of the yen as a safe-haven and stock market-dependent asset also has uncertain prospects.

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On the daily chart, the price reached the support of the embedded line of the price channel (green) in today's Asian session. The Marlin oscillator drops at a high speed and already in the oversold zone.

On the four-hour chart, Marlin's signal line is decreasing and shows no signs of a reversal. In the case of fixing the price at today's low at 105.80, a further decline is likely to support the underlying line of the price channel (red) in the area of 105.04.

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Forecast for EUR/USD on August 5, 2019

EUR/USD

On Friday, the dollar index fell by 0.29%, and with it the euro grew by 21 points. Officially, that is, according to information from the largest business publications, the dollar weakened due to worse than expected employment data in the US, which sharply increased the market expectation of a September rate cut to 97% from 83% in one day and 60% from a week earlier. But employment data actually came out good. Outside the agricultural sector, an expected 164 thousand jobs were added in July, the unemployment rate remained at 3.7% with an expectation of 3.6%, but the broad unemployment assessment index dropped from 7.2% to 7.0%, and the share of the economically active population increased from 62.9% to 63.0% and the average hourly wage in July increased by 0.3% against the forecast of 0.2%. The weak point in the report of the Ministry of Labor may be the revision of the NFP for the previous month from 224 thousand to 193 thousand. The quality of employment is good - 16 thousand jobs were created in the manufacturing sector against the forecast of 5 thousand. Thus, we don't see a connection between Friday's data and rising expectations for a rate cut. Apparently, it was a technical correction - taking profits against the data, because from the new week the Treasury will once again begin massive public debt allocations, and this week will be offered $84 billion of long-term securities and 78 billion of short-term securities maturing in 13 and 26 weeks - the investor needs a currency to buy bonds. In total, the government plans to attract 430 billion dollars in the 3rd quarter, and such a large supply will soon increase the demand for dollars and, as a result, its strengthening. At the same time, the media is intensifying the promotion of the idea of taking into account the September rate cut in current prices.

Thus, we do not expect counter-dollar currencies to grow on any other news background, it will only be needed for strategic buyers of the dollar to have incoming cash (euro buyers) for their transactions. We can only say that this scenario is repeated from year to year during the period of strategic public debt allocations, and now it is such a period. Indeed, furthermore, a rate cut in September is far from having a 97% probability, which Powell tried to tell us at the press conference, but the markets clearly didn't want to listen.

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The technical limit for the euro's growth could be the Fibonacci level of 110.0% (1.1155), that is, the level from which the sales of the euro began at the ECB meeting last week.

On the four-hour chart, the price went above the MACD line, the Marlin oscillator line went into the zone of positive numbers, this output may become false in case of a reversal from current levels. In general, we are waiting for the completion of the observed correction and the euro to further decline to 1.0980 - Fibonacci level of 138.2%.

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Forecast for GBP/USD on August 5, 2019

GBP/USD

US employment data that was released last Friday did not affect the British pound, it added only 30 points, and at the moment the price is near last Thursday's close. On the daily chart, the Marlin oscillator signal line has slightly grown, which, given the general neutral technical picture, is not a signal.

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On the four-hour chart, the Marlin oscillator is in the growth territory and visually the price has formed a small range for gaining strength before further movement. Perhaps the price will receive an impetus to the development of a downward movement from the MACD line, that is, it may still grow to 1.2250. With the price going down below the accumulation range, the price will easily work out the target range of 1.2032/55, which by then will be about 40 points, and will tune to the target of 1.1986 (a 2017 low).

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Fractal analysis of major currency pairs on August 5

Forecast for August 5 :

Analytical review of H1-scale currency pairs:

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For the euro / dollar pair, the key levels on the H1 scale are: 1.1187, 1.1162, 1.1145, 1.1118, 1.1074, 1.1057, 1.1025, 1.0989 and 1.10962. Here, the development of the ascending structure of August 1 is expected after the breakdown of the level of 1.1118. In this case, the goal is 1.1145. Meanwhile, in the range of 1.1145 - 1.1162, there is a price consolidation. For the potential value for the top, we consider the level of 1.1187. After reaching which, we expect a rollback to the bottom.

The range of 1.1074 - 1.1057 is the key support for the ascending structure. Its price passage will have a downward trend. Here, the goal is 1.1025. This level is the key resistance for the subsequent downward movement. Its breakdown will make it possible to count on pronounced movement. Here, the goal is 1.0989. For the potential value for the bottom, we consider the level of 1.0962, and near which, we expect consolidation.

The main trend is the local downward structure of July 31, the formation of the structure for the top of August 1.

Trading recommendations:

Buy 1.1118 Take profit: 1.1145

Buy 1.1162 Take profit: 1.1186

Sell: 1.1056 Take profit: 1.1027

Sell: 1.1023 Take profit: 1.0990

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For the pound / dollar pair, the key levels on the H1 scale are: 1.2254, 1.2192, 1.2158, 1.2099, 1.2069 and 1.2021. Here, we are following the downward cycle of July 19, as well as the local downward structure of July 31. Short-term movement to the bottom is expected in the range of 1.2099 - 1.2069. The breakdown of the last value will allow to expect movement to the potential target - 1.2021. From this level, we expect a departure to the correction.

Short-term upward movement is possibly in the range of 1.2158 - 1.2192. The breakdown of the latter value will lead to the formation of the initial conditions for the top. Here, the potential target is 1.2254.

The main trend is the downward cycle of July 19, the local structure of July 31.

Trading recommendations:

Buy: 1.2158 Take profit: 1.2191

Buy: 1.2194 Take profit: 1.2254

Sell: 1.2099 Take profit: 1.2070

Sell: 1.2067 Take profit: 1.2025

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For the dollar / franc pair, the key levels on the H1 scale are: 0.9875, 0.9854, 0.9839, 0.9816, 0.9797, 0.9766 and 0.9746. Here, we are following the development of the downward cycle of August 1. Short-term downward movement is expected in the range of 0.9816 - 0.9797. The breakdown of the last value should be accompanied by a pronounced downward movement. Here, the goal is 0.9766. For the potential value for the bottom, we consider the level of 0.9746. After reaching which, we expect consolidation, as well as rollback to the top.

Short-term upward movement is possibly in the range of 0.9839 - 0.9854. The breakdown of the latter value will lead to in-depth correction. Here, the goal is 0.9875. This level is a key support for the downward structure of August 1.

The main trend is the downward structure of August 1.

Trading recommendations:

Buy : 0.9839 Take profit: 0.9854

Buy : 0.9856 Take profit: 0.9875

Sell: 0.9815 Take profit: 0.9800

Sell: 0.9795 Take profit: 0.9766

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For the dollar / yen pair, the key levels on the scale are : 107.98, 107.62, 107.20, 106.48, 105.71, 105.14, 104.44 and 104.00. Here, we are following the formation of the downward structure of August 1. The continuation of the movement to the bottom is expected after the breakdown of the level of 106.48. In this case, the goal is 105.71. Short-term downward movement, as well as consolidation is in the range 105.71 - 105.14. The breakdown of the level of 105.14 should be accompanied by a pronounced downward movement. Here, the goal is 104.45. For the potential value for the bottom, we consider the level of 104.00. After reaching which, we expect to go into a correction.

Care in the adjustment zone is expected after the breakdown of the level of 107.20. Here, the goal is 107.62. The range of 107.62 - 107.98 is the key support for the downward structure.

The main trend: the formation of the downward structure of August 1.

Trading recommendations:

Buy: 107.20 Take profit: 107.60

Buy : 107.62 Take profit: 107.98

Sell: 106.45 Take profit: 105.71

Sell: 105.69 Take profit: 105.20

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For the Canadian dollar / US dollar pair, the key levels on the H1 scale are: 1.3324, 1.3297, 1.3256, 1.3224, 1.3175, 1.3156, 1.3129 and 1.3102. Here, we continue to monitor the local ascending structure of July 31. The continuation of the movement to the top is expected after the breakdown of the level of 1.3224. Here, the goal is 1.3256, where consolidation is near this level. The breakdown of the level 1.3257 should be accompanied by a pronounced upward movement. Here, the target is 1.3297. We consider the level of 1.3324 to be a potential value for the top. Upon reaching this level, we expect consolidation as well as a rollback to the bottom.

Short-term downward movement is possibly in the range of 1.3175 - 1.3156. The breakdown of the latter value will lead to a prolonged correction. Here, the goal is 1.3129. This level is a key support for the top.

The main trend is the local ascending structure of July 31.

Trading recommendations:

Buy: 1.3225 Take profit: 1.3255

Buy : 1.3257 Take profit: 1.3295

Sell: 1.3175 Take profit: 1.3156

Sell: 1.3153 Take profit: 1.3130

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For a pair of Australian dollar / US dollar key levels on the H1 scale are : 0.6857, 0.6834, 0.6817, 0.6786, 0.6761 and 0.6738. Here, we are following the downward structure of July 31. The continuation of the downward trend is expected after the breakdown of the level of 0.6786. In this case, the target is 0.6761. For the potential value for the downward structure of July 31, we consider the level of 0.6738. Upon reaching which, we expect a rollback to the top.

Short-term upward movement is possibly in the range of 0.6817 - 0.6834. The breakdown of the latter value will lead to in-depth correction. Here, the target is 0.6857. This level is a key support for the downward structure.

The main trend is the local downward structure of July 31.

Trading recommendations:

Buy: 0.6817 Take profit: 0.6832

Buy: 0.6835 Take profit: 0.6855

Sell : 0.6786 Take profit : 0.6764

Sell: 0.6760 Take profit: 0.6738

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For the euro / yen pair, the key levels on the H1 scale are: 119.52, 119.27, 118.94, 118.69, 118.22, 117.88 and 117.46. Here, we are following the development of the downward cycle of July 30th. Short-term downward movement is expected in the range of 118.22 - 117.88. Hence, there is a high probability of movement in the correction. For the potential value for the bottom, we consider the level of 117.46. From which, we expect a rollback to the top.

Short-term upward movement is possibly in the range of 118.69 - 118.94. The breakdown of the latter value will lead to a prolonged correction. Here, the target is 119.27. The range of 119.27 - 119.52 is a key support for the downward structure.

The main trend is the downward cycle of July 30th.

Trading recommendations:

Buy: 118.70 Take profit: 118.92

Buy: 118.96 Take profit: 119.27

Sell: 118.20 Take profit: 117.90

Sell: 117.86 Take profit: 117.46

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For the pound / yen pair, the key levels on the H1 scale are : 130.86, 130.23, 129.80, 128.98, 128.30 and 127.85. Here, we are following the local downward structure of July 31. The continuation of the movement to the bottom is expected after the breakdown of the level of 128.98. In this case, the goal is 128.30. Price consolidation is in the range of 128.30 - 127.85.

Short-term upward movement is possibly in the range of 129.80 - 130.23. The breakdown of the latter value will lead to a prolonged correction. Here, the goal is 130.86. This level is a key support for the bottom.

The main trend is the local downward structure of July 31.

Trading recommendations:

Buy: 129.80 Take profit: 130.20

Buy: 130.26 Take profit: 130.84

Sell: 128.95 Take profit: 128.30

Sell: 128.28 Take profit: 127.85

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EUR/USD. Useless Nonfarms: Trump made traders turn away from macroeconomic reports

Data on the growth of the US labor market could not support the dollar, which rather unexpectedly came under pressure from an external fundamental background. Another escalation of the trade war between the United States and China has mixed all the cards with dollar bulls. After all, at the end of the July Fed meeting, traders had the confidence that the regulator would limit itself to one round of rate cuts, as a precautionary measure. However, after the release of an extremely weak ISM index in the manufacturing sector, as well as after a resonant statement by Donald Trump, concerns about the Fed's next steps returned to the market.

Let me remind you that at the end of last week, the US president promised to introduce an additional 10 percent duty on imports of Chinese goods worth $300 billion starting on September 1, given that Beijing does not agree to conclude a deal with the United States before this deadline. If this scenario is implemented, additional tariffs will cover almost all imports from China. Trump was also outraged by the fact that China refused to comply with the agreements that were reached at the G-20 summit (we are talking about the resumption of purchases of agricultural goods). The fact that Washington, in fact, did not fulfill its part of the agreements (regarding the lifting of sanctions against Huawei), the head of the White House modestly kept silent.

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Nevertheless, the fact remains: recent events suggest that the positive results of the G20 summit have been completely offset. The first round of negotiations after the summit was completed ahead of time and without any clear result, whereas a few days later, Trump announced the above ultimatum. Here, even without official comments, it becomes clear that the parties are still defending their positions, despite the formal desire to find a mutually beneficial compromise. Before the start of the negotiations, Trump suggested that the Chinese would deliberately pull time before the next presidential election in the United States (which will take place in November 2020), hoping for a change of power. The most likely candidates from the Democratic Party are really ahead of the current president - at least for today. Therefore, there is certainly some sense in Beijing's actions: why make a knowingly unprofitable deal with Trump, if in a year it will be possible to agree on other conditions with Biden? This is the reason for such haste in Donald's decisions - given the rating gap from the Democrats, he needs a victory in a trade war, the negative consequences of which are felt not only by China and the world economy, but also by the US economy.

Such prospects had a fairly strong pressure on the US currency. Traders again increased the likelihood of another round of rate cuts at one of the autumn meetings (most likely in September), while some analysts do not rule out more radical scenarios - either a one-time rate cut of 50 basis points or a third decline in December. of the year. Such an unexpected reversal of the plot allowed the EUR/USD pair to move away from the level of a multi-year low (1.1026) and demonstrate corrective growth to the level of 1.1117. In general, the dollar index in a few hours of Friday fell from 98.258 to 97.873. The yield on 10-year-old Treasuries has also declined significantly - the indicator has collapsed to almost a three-year low (1.843%).

The market clearly focused on geopolitical events, as it completely ignored one of the key macroeconomic indicators, Nonfarms. Although this release was supposed to support a further rally in the US currency: the US labor market continues to recover, demonstrating the growth of the main components. Thus, the number of people employed in the non-agricultural sector increased by 164,000 (which fully coincided with the forecast), while the unemployment rate remained at a record low of 3.7%. The number of people employed in the manufacturing sector of the economy increased by 16 thousand (a positive trend for the 2nd month in a row). The growth rate of the average hourly wage also pleased investors: in annual terms, the indicator rose to 3.2% (for the first time since April), and in monthly terms, the component rose to 0.3% (at this level, the indicator goes for the third month in a row). Thus, the July data completely offset concerns about the dynamics of growth in the US labor market, although this issue was on the agenda this spring, both among investors and members of the US regulator.

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It is likely that after the release of Friday's data, EUR/USD bears would try to enter the ninth figure area or at least try to test a strong support level of 1.0980 (lower Kumo cloud boundary on the monthly chart) - but an unexpected move by the US president ruined the plans of the dollar bulls. When trading was about to close, the pair approached the first resistance level of 1.1120 (Tenkan-sen line on the daily chart), and if the growth of anti-risk sentiment continues, then the bulls will be able to develop further correction - up to the levels of 1.1190 and 1.1220 (middle line BB and Kijun-sen line on D1).

Here it is worth noting that on Friday, the Chinese Ministry of Commerce has already accused Donald Trump of violating the June agreement with Xi Jinping, promising to use "countermeasures". It is likely that this week we will find out what measures we are talking about. Strengthening the US-China conflict will put pressure on the dollar, since the escalation of trade war is seen by the market through the prism of prospects for further easing of the Fed's monetary policy.

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