EUR/USD: plan for the European session on October 10. Fed minutes did not clarify the situation, but demand for the euro

To open long positions on EURUSD you need:

Yesterday's minutes of the US Federal Reserve did not clarify the situation regarding a further interest rate cut, which led to a slight strengthening of the euro today at the Asian session. Optimism regarding the US-China trade deal also contributes to higher demand for the euro. Today, in the morning, buyers need to keep the level of 1.0975. The formation of a false breakdown on it will be the first signal to open long positions in the hope of updating the high in the area of 1.1005 and its breakthrough, which will lead to new levels 1.1033 and 1.1067, where I recommend taking profits. In case the euro falls to the level of 1.0975 after the publication of the minutes of the European Central Bank, one can look at long positions on the test of the lower boundary of the side channel near 1.0943, or buy immediately on the rebound from the low of 1.0905.

To open short positions on EURUSD you need:

Sellers will expect the formation of a false breakdown at the upper boundary of the side channel at 1.1005, but a more important task will be to return to the intermediate support level of 1.0975, under which the pressure on the pair will increase, which will lead to an update of the low of 1.0943. However, we can talk about the resumption of the bearish trend only after breaking 1.0943 and updating support at 1.0905, where I recommend taking profits. The publication of the minutes of the European Central Bank may lead to the euro's growth above the resistance of 1.1005, as well as good news on the US-China deal. In this scenario, it is best to consider short positions in EUR/USD for a rebound from a high of 1.1033.

Signals of indicators:

Moving averages

Trade is conducted in the region of 30 and 50 moving average, which indicates the lateral nature of the market.

Bollinger bands

Volatility is very low, which does not provide signals on 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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USDCAD unable to break critical resistance once again

USDCAD made an attempt to break above the 1.3350 resistance we have been talking about in the last few posts. Price got rejected once again and is now trading at 1.3318. This consolidation around 1.33-1.3350 will soon be broken and volatility will rise.

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Black rectangle - short-term resistance area

USDCAD is making higher highs and higher lows. But bulls need to break above 1.3350 in order to confirm they are in control of the trend and in order to reach 1.3450 area. Support is at 1.33 and next at 1.32.

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On a weekly basis the Ichimoku cloud indicator confirms our view that the important support area is between 1.33-1.32. Price is above both the tenkan- and the kijun-sen while price remains above the weekly Kumo (cloud). All this is supportive of a continuation of the bullish move that started at the June lows. If resistance at 1.3350-1.34 breaks we should see the next leg higher towards 1.3520.The material has been provided by InstaForex Company - www.instaforex.com

EURUSD short-term trend remains bullish but still inside long-term wedge pattern

EURUSD is trading below 1.10 still inside the long-term downward sloping wedge pattern. Short-term trend is bullish as long as price is above 1.0950 and with resistance at 1.10-1.1020 we expect volatility to rise soon.

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Black lines - wedge pattern

Black rectangle- short-term resistance

Green line - short-term support

EURUSD could rise all the way towards the upper wedge boundary around 1.1030 if it breaks 1.10. At 1.1030 we also find the 61.8% Fibonacci retracement of the last leg down from 1.1109. A rejection at 1.10-1.1030 area will open the way for a move below 1.09 and another test of the lower wedge boundary. Support is key for the short-term trend at 1.0950 and at 1.0970.

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Technical analysis of ETH/USD for 10/10/2019

Crypto Industry News:

Donating cryptocurrency donations to political parties received the approval of Japanese Interior Minister and Communications Minister Sanae Takaichi at a press conference.

According to a local media report, Takaichi said political cryptocurrency donations do not have to be disclosed under the Political Funds Control Act, as opposed to cash and securities. Therefore, cryptographic donations can also be made without restrictions.

"Cryptographic resources are not subject to any of the above [regulations] and do not limit donations" - said the minister.

As cryptographic donations become more and more popular, Japanese political parties will have to deal with taxonomy and govern themselves, Takaichi continued. Because this will limit the political activity of politicians, the problem will be discussed by every party and group.

The Japanese cryptocurrency industry is strictly regulated by the Financial Services Agency (FSA), which did not approve any opening of exchanges in 2018 and only 16 in 2017.

Technical Market Overview:

The ETH/USD pair has broken through the technical resistance located at the level of $185.05 and rallied up towards the 50% Fibonacci retracement that was violated as well. Currently, the bulls have managed to hit the 61% of the Fibonacci retracement located at the level of $195.88, but it might not be the end of the up move as the momentum is increasing. Any violation of the level of $195.88 will lead to another leg up towards the technical resistance seen at the level of $202.70 and $215.73. The confirmation of the bottom of the wave (C) at the level of $151.30 will take place when bulls will break through the wave (B) top at the level of $223.50.

Weekly Pivot Points:

WR3 - $200.05

WR2 - $192.33

WR1 - $180.15

Weekly Pivot - $172.02

WS1 - $159.46

WS2 - $151.65

WS3 - $138.64

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 still being treated as a counter-trend correction inside of the uptrend. When the wave 2 corrective cycles are completed, the market might will ready for another impulsive wave up of a higher degree and uptrend continuation.

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Technical analysis of BTC/USD for 10/10/2019

Crypto Industry News:

European Commissioner for Finance, Valdis Dombrovskis, has promised to propose new regulations governing cryptocurrencies, such as Facebook Libra.

According to financial media reports, speaking to EU legislators, Dombrovskis said:

"Europe needs a common approach to crypto-assets such as Libra. I intend to propose new legislation in this area."

Dombrovskis, who was the Prime Minister and Minister of Finance of Latvia and a Member of the European Parliament in the years 2004–2009, is currently seeking reappointment as the Vice-President of the European Commission.

If he were re-appointed, he would be given the task of "an economy that works for the people" and would still be responsible for the Commission's financial services portfolio and its work on "deepening economic and monetary union", as emphasized by the chairwoman Ursula von der Leyen.

In addition to emphasizing the need for new legislation on cryptocurrencies in Europe, Dombrovskis spoke of the need for the EU to address "unfair competition, cybersecurity, and threats to financial stability".

Technical Market Overview:

The BTC/USD pair has broken through the technical resistance located at the level of $8,474 (now support) and made a fresh new local high at the level of $8,647. The momentum is increasing, so the next target for bulls after the breakout is done is seen at the level of $9,046. If this will be the impulsive wave upward, then the low located at the level of $7,676 will be confirmed as the bottom for the wave (c) of wave (A) and the market will develop the wave (B) of the overall corrective move.

Weekly Pivot Points:

WR3 - $9,064

WR2 - $8,729

WR1 - $8,221

Weekly Pivot - $7,955

WS1 - $7,433

WS2 - $7,138

WS3 - $6,572

Trading recommendations:

Due to the short-term impulsive scenario invalidation, 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 still being treated as a counter-trend correction inside of the uptrend. When the wave 2 corrective cycles are completed, the market might will ready for another impulsive wave up of a higher degree and uptrend continuation.

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Technical analysis of GBP/USD for 10/10/2019

Technical Market Overview:

After the GBP/USD has hit the 61% Fibonacci retracement, the bulls immediately started to rally but were capped at the technical resistance located at the level of 1.2282 and the Reversed Pin Bar candlestick was made during this move. This price behavior puts the bulls into a not very comfortable situation as the next technical support is seen at the level of 1.2308. Traders should have this in mind, because of only a clear breakout above the level of 1.2411 will open the road towards the next technical resistance located at the level of 1.2504. It is worth to keep an eye on the current market situation.

Weekly Pivot Points:

WR3 - 1.2623

WR2 - 1.2518

WR1 - 1.2423

Weekly Pivot - 1.2315

WS1 - 1.2215

WS2 - 1.2101

WS3 - 1.2006

Trading recommendations:

The best strategy for current market conditions is to trade with the larger timeframe trend, which is down. All upward moves will be treated as local corrections in the downtrend. In order to reverse the trend from down to up, the key level for bulls is seen at 1.2504 and it must be clearly violated. The key short-term technical support is seen at the level of 1.2231 - 1.2224 and the key short-term technical resistance is located at the level of 1.2381. As long as the price is trading below this level, the downtrend continues towards the level of 1.1957 and below.

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Technical analysis: Important Intraday Levels For EUR/USD, October 10, 2019

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When the European market opens, some economic data will be released such as Italian Industrial Production m/m, French Industrial Production m/m, and German Trade Balance. The US will also publish the economic data such as Natural Gas Storage, Unemployment Claims, Core CPI m/m, and CPI m/m, so amid the reports, the EUR/USD pair will move with low to medium volatility during this day. TODAY'S TECHNICAL LEVELS: Breakout BUY Level: 1.1038. Strong Resistance: 1.1032. Original Resistance: 1.1021. Inner Sell Area: 1.1010. Target Inner Area: 1.0985. Inner Buy Area: 1.0960. Original Support: 1.0949. Strong Support: 1.0938. Breakout SELL Level: 1.0932. (Disclaimer)The material has been provided by InstaForex Company - www.instaforex.com

Technical analysis of EUR/USD for 10/10/2019

Technical Market Overview:

The EUR/USD pair bounced off the technical support level located at 1.0942 and currently is trading close to the key short-term technical resistance located at the level of 1.0999. The bulls might decide to push the prices higher anyway as the market is still in a short-term descending channel. The momentum is still strong and positive, which supports the short-term bullish outlook and the technical support located at the level of 1.0942 should hold the bears in a case of another leg down. Please remember, that the higher timeframe trend is still bearish.

Weekly Pivot Points:

WR3 - 1.1156

WR2 - 1.1079

WR1 - 1.1037

Weekly Pivot - 1.0957

WS1 - 1.0918

WS2 - 1.0839

WS3 - 1.0797

Trading recommendations:

The best strategy for current market conditions is to trade with the larger timeframe trend, which is down. All upward moves will be treated as local corrections in the downtrend. The downtrend is valid as long as it is terminated or the level of 1.1445 clearly violated. There is an Ending Diagonal price pattern visible on the larget timeframes that indicate a possible downtrend termination soon. The key short-term levels are technical support at the level of 1.0926 and the technical resistance at the level of 1.1267.

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Technical analysis: Important Intraday Levels for USD/JPY, October 10, 2019

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In Asia, Japan will release the 30-y Bond Auction, PPI y/y, Core Machinery Orders m/m, and Bank Lending y/y. The US will also publish some economic data such as Natural Gas Storage, Unemployment Claims, Core CPI m/m, and CPI m/m. So there is a probability the USD/JPY pair will move with low to medium volatility during this day. TODAY'S TECHNICAL LEVELS: Resistance. 3: 107.97. Resistance. 2: 107.76. Resistance. 1: 107.55. Support. 1: 107.28. Support. 2: 107.07. Support. 3: 106.86. (Disclaimer)The material has been provided by InstaForex Company - www.instaforex.com

The Fed's minutes: split opinions, QE-4 issue and risks of US-China conflict

The minutes of the Federal Reserve are relatively rare to provoke strong volatility among dollar pairs. As a rule, after a two-week period after the last meeting, the market is already aware of the general mood of the regulator, thanks to the speeches of many of them. Yesterday, the Fed minutes was no exception in this regard: its key points were not a revelation for traders, so the dollar reacted minimally to this release. In addition, market participants are waiting for other, more important and relevant events of a fundamental nature - first of all, we are talking about trade negotiations between the United States and China, as well as data on the growth of US inflation, which will be published today.

Nevertheless, it is not worth completely ignoring the "minutes". And although this document did not affect the dynamics of the dollar in the moment "here and now", its value should not be underestimated. For example, yesterday's release once again reminded the market that the Fed had a serious split of opinions, and this fact may affect further decisions of the US regulator.

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Let me remind you that at the September meeting, the Federal Reserve lowered the interest rate by 25 basis points. Against this step were such members of the Fed as the head of the Federal Reserve Bank of Kansas, Esther George and the head of the Federal Reserve Bank of Boston, Eric Rosengren. They were against easing the monetary policy in July, so the last meeting only confirmed their position. Moreover, the dot plot of the Fed members' expectations (dot plot) suggests that George and Rosengren are not united in their opinion. So, seven officials of the Federal Reserve stated the appropriateness of further steps to mitigate monetary policy, while five of their colleagues spoke in favor of maintaining a wait-and-see attitude - at least until the end of the year. Another five Fed members did not rule out a 25-point rate increase.

As you can see, the opinions of the Committee members diverged significantly: each has its own arguments in favor of a particular decision. So, according to the doves, the Federal Reserve needs to play ahead of schedule - according to them, lowering the interest rate will help offset the negative consequences of a slowdown in the global economy. In addition, the trade conflict with China has a negative impact on the prospects for US economic development. Supporters of soft monetary policy also pointed to a weak inflation rate, the base indicator of which has not been able to reach the target two percent level for a long time. According to the hawks, the regulator in this case is ahead of the events, depriving itself of the corresponding leverage that will be needed in the future. They believe that the most severe economic upheaval (possibly) is yet to come, so the regulator needs to pause now or even increase the rate by 25 points.

Despite the existing split in the Fed camp, the market is almost certain that the regulator will resort to another round of rate reduction: the probability of this step is almost 90%. Many of them do not exclude a double decline in November and December. In my opinion, such a scenario will be implemented in the event of the failure of the US-China negotiations and a new round of trade war. It is necessary to note one more important thesis of the published minutes: members of the Federal Reserve agreed that they would make decisions on rates, focusing on economic data. It is worth recalling that in recent years, US releases have not pleased dollar bulls: the producer price index and the ISM production index came out in the red zone, slowing down and not significantly reaching forecast values. If today's data on inflation in the US will also disappoint, then the likelihood of at least one rate cut will increase to 100%.

Another important nuance. During his last speech, the head of the Fed unexpectedly announced that soon the US central bank will resume regular operations on the open market, increasing its balance sheet account. The market interpreted this step in its own way - according to a number of experts, the regulator, in fact, starts QE-4, although Powell emphasized separately that this is not about the resumption of the stimulating program. According to the minutes of the September meeting, members of the regulator discussed this issue. The head of the Fed said that a series of "spot money injections" to maintain an adequate level of reserves is different from a full-scale quantitative easing program, and markets should understand and accept this difference.

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Thus, the essence of the published minutes is as follows: The Federal Reserve is ready to lower the interest rate further. Another question is when exactly this must be done: before or after possible economic shocks. Some advocate the use of preventive measures, while others urge not to spend leverage that may come in handy in the future.

All this suggests that the fate of the interest rate again depends on the outcome of trade negotiations between Washington and Beijing. If they fail, the rate will probably be reduced at the next meeting. Otherwise, the regulator may take a wait-and-see attitude until the beginning of next year, tracking the dynamics of key US macroeconomic indicators.

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Forecast for EUR/USD on October 10, 2019

EUR/USD

Yesterday, the euro did another test of the Fibonacci level on the daily chart of 138.2%, and today it rises above the Asian session. The signal line of the Marlin oscillator returned to the growth zone, the double convergence on the oscillator has worked in full force. The growth target is the MACD line in the price area of 1.1042.

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On the four-hour chart, the price of the previous day has been supported by the balance line, Marlin is also in the growth trend zone. The signal to open a position will be the price overcoming the top of October 7 (1.1001).

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Forecast for GBP/USD on October 10, 2019

GBP/USD

Yesterday, the British pound sharply rose by 90 points, but following a general trend, closed the day with a decline of 12 points. The price could not shift the market balance towards growth - on the daily and four-hour charts of consolidation above the balance lines (indicator red) did not happen. Also on the daily chart, the price is kept below the Fibonacci line of 223.6%. If yesterday's surge is seen as a detente of the market, today we can expect a further decline to the previously set goals: 1.2155 - Fibonacci level of 238.2% and 1.2120 - support for the price channel.

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On a four-hour chart, the price forms a short consolidation, probably this is preparation for the meeting of today's economic releases. August industrial production is expected to grow at zero, production in the construction sector may show a 0.4% decrease, commodity trade balance is expected to worsen from -9.1 billion pounds to -10.0 billion. GDP for August is projected to increase by 0.0% against 0.3% in July.

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We are waiting for prices to develop in a downward and main scenario.

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Forecast for USD/JPY on October 10, 2019

USD/JPY

The dollar against the yen found strong support in the form of a balance line on the daily chart. Yesterday, thanks to it, the price went above the technical resistance of the line of the growing price channel (green), now the doors of the nearest targets are opened before the price: 108.12 and 108.95. The Marlin indicator on daily in the growth zone.

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On a four-hour chart, the price has consolidated above the indicator lines of balance and MACD, the Marlin oscillator in the growth zone. We look forward to continued price increases.

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Fractal analysis of the main currency pairs on October 10

Forecast for October 10:

Analytical review of currency pairs on the scale of H1:

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For the euro / dollar pair, the key levels on the H1 scale are: 1.1082, 1.1039, 1.1021, 1.1004, 1.0966, 1.0949 and 1.0925. Here, the price formed a small local structure for the top of October 8. The continuation of the movement to the bottom is expected after the breakdown of 1.1004. In this case, the target is 1.1021. The breakdown of which will allow us to count on the movement of 1.1039. Price consolidation is near this level. For the potential value for the top, we consider the level of 1.1082. The expressed movement to which is expected after the breakdown of the level of 1.1040.

Short-term downward movement is possibly in the range 1.0966 - 1.0949. The breakdown of the last value will lead to a long correction. Here, the target is 1.0925. This level is a key support for the top.

The main trend is the medium-term upward structure from October 1, the local structure from October 8.

Trading recommendations:

Buy: 1.1005 Take profit: 1.1020

Buy 1.1022 Take profit: 1.1037

Sell: 1.0965 Take profit: 1.0950

Sell: 1.0947 Take profit: 1.0925

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For the pound / dollar pair, the key levels on the H1 scale are: 1.2308, 1.2268, 1.2243, 1.2191, 1.2171, 1.2131 and 1.2081. Here, we follow the development of the downward cycle of October 3. The continuation of the movement to the bottom is expected after the price passes the noise range 1.2191 - 1.2171. In this case, the target is 1.2131. Price consolidation is near this level. For the potential value for the bottom, we consider the level of 1.2081. Upon reaching which, we expect a pullback to the top.

Short-term upward movement is expected in the range 1.2243 - 1.2268. The breakdown of the latter value will lead to an in-depth correction. Here, the target is 1.2308. This level is the key downward structure.

The main trend is the downward cycle of October 3.

Trading recommendations:

Buy: 1.2243 Take profit: 1.2267

Buy: 1.2270 Take profit: 1.2308

Sell: 1.2170 Take profit: 1.2135

Sell: 1.2128 Take profit: 1.2081

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For the dollar / franc pair, the key levels on the H1 scale are: 1.0027, 0.9999, 0.9974, 0.9957, 0.9921, 0.9892, 0.9872 and 0.9845. Here, we follow the development of the descending structure of October 3. The continuation of the development of the downward trend is expected after the breakdown of the level of 0.9921. In this case, the target is 0.9892. Price consolidation is in the range of 0.9892 - 0.9872. For the potential value for the bottom, we consider the level of 0.9845, upon reaching which, we expect a pullback to the top.

Short-term upward movement is possibly in the range of 0.9957 - 0.9974. The breakdown of the last value will lead to an in-depth correction. Here, the target is 0.9999. This level is a key support for the downward structure. Its breakdown will lead to the development of the upward movement. Here, the potential target is 1.0027.

The main trend is the descending structure of October 3.

Trading recommendations:

Buy : 0.9976 Take profit: 0.9999

Buy : 1.0003 Take profit: 1.0027

Sell: 0.9920 Take profit: 0.9892

Sell: 0.9870 Take profit: 0.9845

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For the dollar / yen pair, the key levels on the scale are : 108.39, 108.14, 107.80, 107.51, 107.10, 106.90, 106.54 and 106.27. Here, the price forms the potential for the top of October 4. The continuation of the movement to the top is expected after the breakdown of the level of 107.51. In this case, the target is 107.80. Price consolidation is near this level. The breakdown of the level of 107.80 will lead to a pronounced movement. Here, the goal is 108.14. For the potential value for the top, we consider the level of 108.39. Upon reaching which, we expect consolidation, as well as a pullback to the bottom.

Short-term downward movement is expected in the range of 107.10 - 106.90. The breakdown of the last value will have the downward structure. In this case, the first target is 106.54. We consider the level 106.27 as a potential value for the bottom.

The main trend: the formation of the upward potential of October 4.

Trading recommendations:

Buy: 107.51 Take profit: 107.80

Buy : 107.82 Take profit: 108.12

Sell: 107.10 Take profit: 106.92

Sell: 106.88 Take profit: 106.60

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For the Canadian dollar / US dollar pair, the key levels on the H1 scale are: 1.3369, 1.3350, 1.3336, 1.3304, 1.3287 and 1.3254. Here, the price forms the medium-term initial conditions for the top of October 2. Short-term upward movement is possibly in the range 1.3336 - 1.3350. From here, we expect a key reversal in the correction. For the potential value for the top, we consider the level of 1.3369.

Short-term downward movement is possibly in the range of 1.3304 - 1.3287. The breakdown of the latter value will lead to an in-depth correction. Here, the target is 1.3254. This level is a key support for the top.

The main trend is the formation of medium-term initial conditions of October 2.

Trading recommendations:

Buy: 1.3336 Take profit: 1.3350

Buy : 1.3352 Take profit: 1.3369

Sell: 1.3304 Take profit: 1.3390

Sell: 1.3285 Take profit: 1.3260

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For the Australian dollar / US dollar pair, the key levels on the H1 scale are : 0.6868, 0.6838, 0.6815, 0.6782, 0.6772, 0.6756, 0.6730 and 0.6710. Here, the price is close to the cancellation of the upward structure from October 2, which requires a breakdown of the level of 0.6710. In this case, the potential target is 0.6668. The continuation of movement to the top is expected after the breakdown of the level of 0.6756. Here, the first target is 0.6772. The price passes the noise range 0.6772 - 0.6782 will lead to the development of a pronounced movement to the top. In this case, the target is 0.6815. Short-term upward movement, and also consolidation is in the range of 0.6815 - 0.6838. For the potential value for the top, we consider the level of 0.6868. The movement to which is expected after the breakdown of the level of 0.6840.

Consolidated movement is possibly in the range of 0.6746 - 0.6730. The breakdown of the last value will lead to a long correction. Here, the potential target is 0.6710. This level is a key support for the ascending structure.

The main trend is the ascending structure of October 2, the stage of deep correction.

Trading recommendations:

Buy: 0.6756 Take profit: 0.6772

Buy: 0.6782 Take profit: 0.6815

Sell: 0.6705 Take profit: 0.6670

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For the euro / yen pair, the key levels on the H1 scale are: 118.75, 118.54, 118.21, 117.94, 117.58, 117.38, 117.25 and 117.06. Here, we are following the formation of the ascending structure of October 4. The continuation of the development of the ascending structure is expected after the breakdown of the level of 117.95. In this case, the goal is 118.21. Price consolidation is near this level. The breakdown at the price level of 118.21 will lead to the development of pronounced movement. Here, the goal is 118.54. For the potential value for the top, we consider the level of 118.75. Upon reaching which, we expect consolidation, as well as a pullback to the bottom.

A correction is expected after the breakdown of the level of 117.58. Here, the target is 117.38. The range of 117.38 - 117.25 is a key support for the top. Its passage at the price will lead to the development of a downward structure. Here, the goal is 117.06.

The main trend is the upward structure of October 4.

Trading recommendations:

Buy: 117.95 Take profit: 118.20

Buy: 118.23 Take profit: 118.54

Sell: 117.56 Take profit: 117.40

Sell: 117.25 Take profit: 117.07

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For the pound / yen pair, the key levels on the H1 scale are : 132.51, 131.89, 131.45, 130.62, 130.02, 129.47 and 128.37. Here, the main structure is the downward cycle of September 20. The continuation of the movement to the bottom is expected after the breakdown of the level of 130.62. In this case, the target is 130.02. Short-term downward movement as well as consolidation is in the range of 130.02 - 129.47. For the potential value for the bottom, we consider the level of 128.37. The movement to which is expected after the breakdown of the level of 129.40.

Short-term upward movement is possibly in the range of 131.45 - 131.89. The breakdown of the last value will lead to a long correction. Here, the target is 132.51. We also expect the formation of expressed initial conditions for the upward cycle to this level.

The main trend is the descending structure of September 20.

Trading recommendations:

Buy: 131.45 Take profit: 131.85

Buy: 131.92 Take profit: 132.50

Sell: 130.60 Take profit: 130.04

Sell: 130.00 Take profit: 129.50

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#USDX vs EUR / USD vs GBP / USD vs USD / JPY (H4). Comprehensive analysis of movement options from October 10, 2019 APLs

Here are the options for the development of movement in an integrated form of currency instruments in H4 - #USDX, EUR / USD, GBP / USD and USD / JPY from October 10, 2019.

Minuette (H4 time frame)

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US dollar Index

The movement of the dollar index #USDX from October 10, 2019 will continue to be determined by the development and the direction of the breakdown of the boundaries of 1/2 Median Line channel (98.77 - 98.95 - 99.15) Minuette operational scale fork. The details are shown in the animated chart.

The breakdown of the upper boundary of the 1/2 Median Line channel (resistance level of 99.15) of the Minuette operational scale fork will direct the movement of the dollar index to the boundaries of the 1/2 Median Line Minuette channel (99.30 - 99.45 - 99.57) with the prospect of reaching the lower boundary of the ISL38.2 (99.70) equilibrium zone of the Minuette operating scale fork.

In contrast, in case that the lower boundary of the 1/2 Median Line Minuette channel (support level of 98.77) is broken, the option of developing the downward movement #USDX to the targets is the local minimum 98.63 - the upper boundary of the ISL38.2 (98.40) equilibrium zone of the Minuette operational scale fork.

The details of the #USDX movement are presented in the animated chart.

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Euro vs US dollar

The single European currency continues to remain inside the 1/2 Median Line channel (1.0940 - 1.0965 - 1.0990) of the Minuette operational scale fork, the direction of breakdown of which will determine the further development of the EUR / USD movement from October 10, 2019. The marking the movement inside the 1/2 Median Line channel can be seen at the animated chart.

The breakdown of the lower boundary of the 1/2 Median Line channel (support level of 1.0940) of the Minuette operational scale fork - the development of the downward movement of the single European currency can be continued to the goals - 1/2 Median Line Minuette (1.0925) - the initial line of SSL Minuette (1.0915) - the lower boundary of the 1/2 Median Line channel (1.0895) of the Minuette operational scale fork.

In contrast, the breakdown of the upper boundary of the 1/2 Median Line Minuette channel (resistance level of 1.0990) will make it relevant to continue the development of the upward movement of EUR / USD to the equilibrium zone (1.1025 - 1.1060 - 1.1095) of the Minuette operational scale fork.

The details of the EUR / USD movement options are shown in the animated chart.

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Great Britain pound vs US dollar

The movement of Her Majesty's GBP / USD currency from October 10, 2019 will be determined by the direction of the breakdown of the range :

  • resistance level of 1.2250 at the upper boundary of the 1/2 Median Line channel Minuette operational scale fork;
  • support level of 1.2200 of the 1/2 Median Line Minuette operating scale fork.

The breakdown of the 1/2 Median Line Minuette (support level of 1.2200) - the development of Her Majesty's currency movement towards goals - 1/2 Median Line Minuette (1.2165) - lower boundary of the ISL61.8 (1.2120 equilibrium zone of Minuette operational scale fork - lower boundary of 1/2 Median Line channel (1.2080) of the Minuette operational scale fork with the prospect of reaching a minimum of 1.1958.

Meanwhile, the breakdown of the upper boundary of the 1/2 Median Line Minuette channel (1.2250) will make the development of the upward movement of GBP / USD relevant whose goals will be - the upper boundary of ISL38.2 (1.2280) equilibrium zone Minuette operational scale fork - final Shiff Line Minuette (1.2370) - ISL38.2 (1.2405) lower boundary of the Minuette operational scale fork.

The details of the GBP / USD movement can be seen in the animated chart.

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US dollar vs Japanese yen

As in the previous case, the movement of the USD / JPY currency of the "country of the rising sun" from October 10, 2019 will also be determined by the direction of the breakdown of the range:

  • resistance level of 107.70 at the upper boundary of ISL38.2 equilibrium zone of the Minuette operational scale fork;
  • support level of 107.35 at the upper boundary of the 1/2 Median Line channel Minuette operational scale fork.

The breakdown of ISL38.2 Minuette (resistance level of 107.70) - the development of the USD / JPY movement in the equilibrium zone (107.70 - 108.00 - 108.25) of the Minuette operational scale fork with the prospect of reaching a maximum of 108.50.

On the other hand, the breakdown of the support level of 107.35 - the movement of the currency of the "land of the rising sun" will continue in the 1/2 Median Line channel (107.35 - 107.10 - 106.85) of the Minuette operational scale fork with the prospect of reaching support levels - 106.77 (the initial SSL line for the Minuette operational scale fork) - local minimum 106.49 - the upper boundary of the 1/2 Median Line Minuette channel (106.40).

We look at the details of the USD / JPY movement in the animated chart.

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The review is made without taking into account the news background. Thus, the opening of trading sessions of the main financial centers does not serve as a guide to action (placing orders "sell" or "buy").

The formula for calculating the dollar index :

USDX = 50.14348112 * USDEUR0.576 * USDJPY0.136 * USDGBP0.119 * USDCAD0.091 * USDSEK0.042 * USDCHF0.036.

where the power coefficients correspond to the weights of the currencies in the basket:

Euro - 57.6% ;

Yen - 13.6% ;

Pound Sterling - 11.9% ;

Canadian dollar - 9.1%;

Swedish Krona - 4.2%;

Swiss franc - 3.6%.

The first coefficient in the formula leads the index to 100 at the start date of the countdown - March 1973, when the main currencies began to be freely quoted relative to each other.

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

Forecast for the price of gold - GOLD for October and November

In September, after a period of rapid growth, the price of gold stopped near the level of $ 1,500. How long will the consolidation continue, should traders and investors expect a decline in the price of gold and when growth is possible? We will analyze in this article.

The summer of 2019 was very favorable for gold. Within three months, the price rose from the level of 1300 to 1550 dollars per troy ounce, and it seemed that gold was about to reach the level of $ 1600, but it was not there. Thus, September turned out to be not very successful for gold, which pretty much disappointed many investors, and speculators focusing on rising prices began to suffer losses. So what really happened and what should we expect next?

In order to answer this question, we need to understand how the gold market functions and what drives the price. I must say right away that I do not pretend to the truth in the last resort and may be mistaken in my assumptions. Nevertheless, I dare to bring them to the judgment of the readers.

First of all, we need to understand that the price of gold, which is formally determined in London, is in fact determined not there, but in the USA, because the largest trading volumes are held on the New York COMEX Exchange and the Chicago CME Exchange (COMEX-CME Group), where they trade gold futures. Despite the fact that futures require physical delivery and are traded every month, financial contracts are carried out on most contracts, which means that these commodity futures are largely subject to financial seasonality.

Financial seasonality, in turn, is formed by quarterly cycles, according to which futures trading in March, June, September and December have the greatest liquidity. To prove this, let's look at the volume and Open Interest of CME Gold Futures. On Tuesday, October 8, Open Interest in the November contract was equal to 1037 contacts, and in the December contract was equal to 482703 contracts. However, gold has its own specifics, and the most liquid contracts are those that close in February, April and August, although the most liquid are June and December.

In addition to futures contracts, the exchange trades monthly options tied to a specific futures: February (G), April (J), June (M), August (Q), October (V) and December (Z). There are still weekly options, but we will not consider them.

Options trading takes place through an open auction, when the buyer and the seller independently look for each other, placing orders in the exchange terminal. It is believed that in the general case, large players sell options and small traders buy, although this is not always the case, and most traders build various option designs, but ruthless statistics say that most options close out of money (out the money), which provides sellers with a positive mathematical expectation from the transaction.

Cases where sellers suffer losses, and most of the options are closed in money (in the money), are extremely rare, but possible. This is what happened this summer, when demand for gold exceeded all possible forecasts, and the trend turned out to be strong enough to force option sellers to supply futures at unprofitable prices.

The main impulse of Gold purchases was European and American exchange-traded funds, which actively bought gold in response to various factors, whether it be a reduction in the Fed and the ECB rates, a fall in overall profitability in the eurozone, trade wars or speculative positioning in futures and options (Fig.one). As we can see from the chart below, American and European funds actively bought gold in June and September.

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Fig.1: Monthly cash flows of ETFs. Source: World gold council

As a result of the price increase, in May - September, option sellers suffered losses, but does this mean that they are ready to accept them in December? By no means, in fact, losses on the December contract will mean an extremely unfortunate year for option sellers, and in this regard, we can assume that they will try to correct the situation that is not in their favor by December.

If we consider the situation in the December option contract OGZ9 (closing November 25), then it now looks like this. The Put / Call Ratio = 0.61 option ratio means that for 100 call options there are only 61 put options, and the maximum pain point for Max Pain buyers is at $ 1,425 (Fig.2). In other words, the higher the price, the greater the losses sellers will bear and the greater profit buyers will receive.

In the November option contract OGX9 (closing October 28), the ratio Put / Call Ratio = 0.71, and the MP point is located at around $ 1475. As you can see, in both contracts the interest of option sellers is significantly lower than the current futures - $ 1,510, which suggests the option of lowering the price of gold in the future in October and November.

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Fig.2: The ratio of option positions in gold to the OGZ9 contract as of October 8th. CME Source

The fact that the mood in the futures market is gradually changing, says the latest report on the obligations of traders - COT, published by the US Commodity Futures Commission CFTC last Friday, October 4. According to the report, in just one week since the end of September, Open Interest in gold futures lost a fifth of open positions, falling from a record 1 million 248 thousand contacts up to 1 million 250 thousand contacts. The decline in the OI of futures in the cash gold market was reflected in the fall in prices from the level of 1,530 to 1,470 dollars per troy ounce.

Moreover, the main category of players who closed long positions in the futures market were Money Manager speculators. They belong to ETF exchange trading funds, which actively bought gold in the previous four months (Fig.one). Long positions Money Manager decreased from 309 thousand up to 254 thousand contracts in just one week. It is the category of speculators that the US Commodity Futures Commission classifies as major buyers in the commodity market. Thus, it turns out that buyers closed their long positions, but if the main buyers leave the market, then who will buy gold and move the price up?

It is assumed that closing long positions of speculators was by no means an accidental positioning. Perhaps, the drivers that are moving the price so far have stopped working, and some traders prefer to take profits in anticipation of new events. However, the technical picture that each of us can observe in the forex terminals fully confirms my assumptions.

So, what conclusion can I draw from my thoughts? According to the futures and options market, as well as reports on the positions of COT traders, I assume that the price of gold will undergo a correction to its rising trend in the daily time in October and November this year. This will enable investors to buy gold at lower prices, in turn, traders will be able to earn on lowering prices.

In my opinion, the rise in the price of gold will begin no earlier than the second half of November, on the night of New Year holidays, and most likely, after the December option contracts are closed, as well as after new growth impulses appear on the market. Such impulse may include risks of falling stock markets, a policy of lowering Fed rates, positioning in the futures market, and the celebration of the lunar new year, which will be held in China and Asia from January 25 and the next few weeks.

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

EURUSD and GBPUSD: What to look for in the Fed minutes. Rumors didn't help resume the pound's growth

Given the absence of important fundamental statistics today in the morning, all the attention of traders is focused on the situation around Brexit, as well as on today's minutes of the US Federal Reserve.

GBPUSD

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The British pound, which collapsed yesterday against the US dollar after news that the EU will not make concessions to Britain on the Northern Ireland border, has sharply increased today. However, the growth was short-lived, as it was based only on rumors that the EU could still make such concessions. In the morning, a note was made in the Times of London that the EU could agree to allow a double majority in the Northern Ireland assembly. However, Downing Street immediately denied these rumors, saying that London would not accept an additional agreement concerning only Northern Ireland, which quickly returned the pound to its place, making it possible for new players to enter short positions from fairly large levels of resistance.

Yesterday in Brussels, they expressed the opinion that, most likely, the British government would turn to the EU for extending the Brexit term until the summer of next year, making a direct hint that the EU would not object to this. However, Prime Minister Boris Johnson has so far adhered to his previous strategy, saying that England will withdraw from the EU on October 31 this year, with or without an agreement.

From a technical point of view, in addition to updating the level 1.2285, nothing has changed. An unsuccessful return to the resistance of 1.2240 may lead to further sales and the resumption of the bearish trend with the test of the next monthly lows in the areas of 1.2170 and 1.2110.

EURUSD

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In the afternoon, attention will be focused on the publication of the minutes of the September meeting of the US Federal Reserve.

It is no secret to anyone that the Fed can lower interest rates by another 25 points in December this year, as well as announce the launch of a new program of quantitative easing, as committee chairman Jerome Powell indirectly hinted yesterday. Therefore, attention today must be focused on the distribution of votes within the committee, as the text of the minutes should provide more detailed information on the discussion of the decision to lower the key interest rate to 1.75%.

Also, attention will be drawn to the forecast for inflation in 2019, 2020 and 2021 from Fed economists. If they are revised downward, this will be another signal in the direction of easing monetary policy.

A significant moment is a "split in the ranks of the Fed." If there are more people who oppose further interest rate cuts in the future, the less pressure will be created on the US dollar.

As for the technical picture of the EURUSD pair, buyers of risky assets showed activity in the first half of the day, but failure to update Tuesday's high may create serious problems for further growth. Returning 1.0970 under intermediate support will return the market to a bearish mood, which will push the trading instrument to the lows of 1.0940 and 1.0905. It will be possible to talk about the resumption of the bull market only after a breakthrough of resistance in the 1.1000 area, which will lead to larger local highs in the areas of 1.1040 and 1.1070.

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

Markets are frozen in anticipation of important events, Washington and Beijing could upset the fragile balance

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The markets are in expectant sentiment. Investors are waiting for a new round of high-level US-China trade negotiations to be held October 10-11, as well as the publication of the minutes of the September meetings of the Fed and the ECB.

Speaking at the meeting of the National Association of Business Economics (NABE) the day before, Fed Chairman Jerome Powell said the regulator is returning to buying assets. At the same time, the head of the American Central Bank noted that this should not be regarded as a new round of quantitative easing (QE): the Federal Reserve is only increasing its balance.

"As we pointed out in the March statement on the normalization of the Fed's balance sheet, there will come a time when we will begin to increase our portfolio of securities to maintain an appropriate level of reserves. This time has come." said J. Powell.

He emphasized that there was no question of large-scale asset purchase programs, similar to those that the Central Bank conducted three times between 2008 and 2014. According to the chairman of the Federal Reserve, this is not stimulating the American economy: it is already in good shape.

During QE, the Fed acquired long-term US government bonds in the secondary market. Now, the regulator intends to buy short-term bills which is necessary to restore balance in the monetary system.

Since the end of QE, the amount of bank reserves has decreased from $ 2.8 trillion to $ 1.4 trillion. The balance of the Federal Reserve began to decline rapidly since 2018 as part of the process of tightening monetary policy.

On the other hand, the shortage of dollar liquidity led to an increase in money market rates above 10%, and thanks only to the active use of US Central Bank repo transactions did they drop to less than 2%. It is assumed that regular purchase of bills will be a less costly way to stabilize the situation than repurchase operations. In this case, the balance of the Fed will grow. This is a "bearish" factor for greenbacks.

Thus, investors are still counting on a federal rate cut at the October FOMC meeting.

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Recently, the head of the Federal Reserve, Jerome Powell, often recalls international risks and says that the regulator will act accordingly to support the growth of the US economy. It draws parallels with the 1990s, when the Central Bank carried out monetary expansion three times for preventive purposes.

The derivatives market estimates the chances of reducing the federal funds rate by 25 basis points at the next FOMC meeting at 84%. They increased after it became known that the base producer price index (PPI) in the US in September unexpectedly declined by 0.3% after increasing by 0.1% in August.

Due to this, Jerome Powell's announcement of the Fed's return to buy assets has diverted investor attention from the publication of the minutes of the September FOMC meeting. However, the Federal Reserve did not yet know about the negativity from business activity and producer prices; thus, the tone of the protocol will be rather hawkish, which will allow the EUR / USD bears to carry out another attack.

The main currency pair came up against strong resistance while trying to grow above 1.10.

It should be noted that this pair is quite strongly correlated with the general demand for risky assets. In 2017, it grew spectacularly, adding 16% in nine months, when the world enjoyed a simultaneous acceleration of global growth, and vice versa, pressure on EUR / USD strengthened amid an escalation of trade disputes. Last week, the pair slipped below 1.10 and remains at the lower boundary of the downward trading range.

Further postponement of the final trade agreement between the United States and China seems the most likely option as of now. However, in this case, the risk appetite may increase, and the euro may well be under increased pressure, as well as the currencies of developing countries. Following that, the whole question will arise whether politicians will be able to withstand the global cooling of business activity. In this regard, the EUR / USD pair has the prospect of returning to the area of 1.03-1.05, where it has found support since 2015, before the end of December.

If the markets are so impressed by the progress of the US-Chinese trade negotiations and there is hope for a decrease in tariffs and a reversal of world trade to growth, then EUR / USD can not only return to the upper boundary of the downward channel above 1.12 in the coming weeks, but also test the level of 1.14. Such a reversal also seems possible in the case of strengthening faith in the restoration of the European economy and accelerating inflation in the region, which will allow the ECB not to put so much pressure on the pedal of monetary impulse.

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

EUR/USD. October 9. Results of the day. The pair is in a flat and awaits data on inflation in the US and Powell's latest

4-hour timeframe

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Amplitude of the last 5 days (high-low): 60p - 58p - 43p - 39p - 55p.

Average volatility over the past 5 days: 51p (average).

On Wednesday, October 9, the EUR/USD pair was unable to continue the downward movement that had begun the day before. Thus, the pair moved to the side channel, which is signaled by Bollinger Bands, now directed sideways. In the past few days, traders clearly cannot determine which way to trade the pair, and this is not surprising, since there were no important macroeconomic publications from the very beginning of the week. There are only daily speeches by Jerome Powell, who, however, does not say anything that traders could respond by rough opening of positions. Yesterday there was potentially important information that the Federal Reserve plans to start buying assets from the open market. Many traders even considered that the regulator resumes the quantitative easing program that it had already conducted but stopped its implementation long ago, but Powell explained that this is a temporary and small-scale redemption of short-term bills, and not about buying long-term government bonds. Thus, we can say that the news from the United States and the European Union, in principle, is coming, but there is no data that can move the pair from its spot. Based on this, we can only wait for these very data or the moment when the market will move for other reasons. These may be technical reasons, this may be the entry into the international currency market of a bank with a large application for the purchase of euros or dollars, which will cause a sharp change in supply and demand for this currency and, accordingly, a change in the exchange rate.

By the way, Jerome Powell has another speech set for tonight and we do not recommend missing it, although the last three of his speeches were not very interesting for the forex market. In addition, the minutes of the Fed meeting is set to be released today, however, these minutes very rarely contain any unexpected information. The FOMC minutes is rather a written summary of the results of the Fed meeting, that is, traders will not learn anything new from it.

The last two trading days of the week will be a little more interesting than the first three, but it is very difficult to call them fascinating from a fundamental point of view. The value of inflation in the United States for September will be published on Thursday, and, according to analysts, a slight acceleration is expected to reach 1.8% y/y. We can check whether Jerome Powell was right when he recklessly declared that inflation was at "acceptable levels". Last month, we recall, many also expected an acceleration in the consumer price index, but instead there was a slowdown. A speech by Mario Draghi will take place on Friday, which is unlikely to please buyers of the European currency, and is also unlikely to surprise investors at all. Mario Draghi will leave his position at the end of the month,so it makes little sense to conduct active work to change the monetary policy of the ECB now. Moreover, at the last meeting, he already announced a reduction in the deposit rate and revival of the QE asset-purchase program in November. Thus, it is unlikely that the ECB will go twice in a row to reduce the rate, therefore, nothing special can be expected from Mario Draghi.

Trading recommendations:

The EUR/USD pair went sideways. Thus, traders are now not recommended to conduct any trade. It is recommended to wait until the flat is completed, the Bollinger Bands widen to one side and only then should you open new positions for the euro/dollar pair.

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

Explanation of the illustration:

Ichimoku indicator:

Tenkan-sen is the red line.

Kijun-sen is the blue line.

Senkou Span A - light brown dotted line.

Senkou Span B - light purple dashed line.

Chikou Span - green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD indicator:

Red line and bar graph with white bars in the indicator window.

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

GBP/USD. October 9. Results of the day. The UK and the EU continue to blame the impending

4-hour timeframe

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Amplitude of the last 5 days (high-low): 97p - 147p - 81p - 49p - 107p.

Average volatility over the past 5 days: 96p (high).

Great Britain and the European Union are like two tennis players - they throw the ball of charges through the net. Boris Johnson has repeatedly stated that he has made a "generous and fair" proposal to Brussels and is trying in every possible way to find a common language with its European colleagues and conclude a "deal" as the Parliament wishes. Unfortunately, the EU does not consider this proposal "generous and fair". There is one very important question for Boris Johnson: why did he not spend the first month and a half of his reign on negotiations with the European Union, but on preparing for the hard Brexit? Recall that about 100 million pounds were allocated only for advertising hard exit, to inform the entire population of the United Kingdom about the upcoming exit and all its aspects. Since, according to many media and the public as a whole, someone alone should be to blame for the disordered Brexit, the EU also does not want to take the blame. Not later than today, the head of the European Commission, Jean-Claude Juncker, once again stated that a "divorce" without an agreement would have disastrous consequences for the UK. "I do not accept the accusation that the possible failure of the Brexit negotiations is due to the EU's position," Juncker said. "If this fails in the end, the responsibility lies solely with the British side," said Jean-Claude.

Meanwhile, it was reported that immediately after the EU summit, which is now defined as the last chance to conclude a deal, the British Parliament will meet for a meeting, within which the fate of Brexit will be decided. It is expected that if the deal is somehow miraculously agreed between Johnson and the European deputies, then it will be necessary for the British Parliament to approve it as soon as possible. If not, then at a cruising pace it will be necessary to develop a new plan of action, as well as try to understand what Boris Johnson will do and stop him on time if he does try to pull the country out of the EU on October 31.

The pound remained on dry rations today, as there were no really important news for the day. But, despite the news drought, traders were still able to make a jump up, almost work out the critical Kijun-sen line and return to their original positions below the support level of 1.2222. Thus, the downward movement is again more priority and likely. Unfortunately, the pound will continue to remain under pressure from investors at least until October 19, when it becomes clear what the UK expects in the coming months. In theory, 10 days is even enough for traders to pull down the pound/dollar pair to multi-year lows near the price level of 1.1958. We will not evaluate the chances of executing a particular Brexit option now. A huge number of experts and analysts were already engaged in this, and Britain, as it could not leave the EU, is still not able to do this.

The technical picture of the pair now also implies a continued downward movement. The Ichimoku indicator has formed a "dead cross", which is strong, all indicators are pointing down, so short positions are still advisable now.

Trading recommendations:

The pound/dollar currency pair resumed its downward movement. Thus, we recommend that you now support already open short positions with targets at 1.2134 and 1.2109. The fundamental background remains on the side of the US currency, so purchasing the pound is impractical at the moment.

In addition to the technical picture, fundamental data and the time of their release should also be considered.

Explanation of the illustration:

Ichimoku indicator:

Tenkan-sen is the red line.

Kijun-sen is the blue line.

Senkou Span A - light brown dotted line.

Senkou Span B - light purple dashed line.

Chikou Span - green line.

Bollinger Bands Indicator:

3 yellow lines.

MACD indicator:

Red line and bar graph with white bars in the indicator window.

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

AUD/USD. Either 0.6880 or 0.6670: the aussie awaits the outcome of trade negotiations

The Australian dollar, like its American namesake, completely focused on waiting for the outcome of negotiations between the US and China, which should start tomorrow, October 10. The aussie's reaction is expected to be as volatile as possible, since China is Australia's main trading partner. In this context, the prospects for the US dollar are not so clear: in the event of a negotiation failure, the greenback, on the one hand, will be under pressure from the dovish intentions of the Federal Reserve, but, on the other hand, can take advantage of the status of a defensive instrument, as it was during the last escalation trade war this summer. But the fate of the Australian currency in the event of a negative scenario is quite predictable.

I recall that at the last meeting, the Reserve Bank of Australia lowered the interest rate by 25 basis points. This is the third rate cut this year: the regulator first resorted to easing monetary policy this summer, right after the next round of the trade war. However, this factor played an important, but not decisive role. Since February, rumors have been circulating in the market that the Australian central bank will have to resort to incentive measures amid ongoing global conflict and a slowdown in the global economy.

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The hypothetical intentions of the regulator took on a distinct form after the publication of key macroeconomic data. First of all, the growth dynamics of the Australian economy was disappointing: the GDP indicator has been consistently and steadily declining over the course of four quarters since the beginning of last year. This year the situation only worsened: in the second quarter, the key indicator fell to multi-year lows, that is, around 1.4%. Other indicators, in particular labor market data, are also controversial. For example, the unemployment rate, on the one hand, is at low values, and the overall growth rate of the number of employed people is consistently coming out of the "green zone". However, the structure of this release suggests that the increase in the number of employees is due only to part-time employment. But full employment shows a negative trend, collapsing into a negative area.

All this suggests that AUD/USD traders should not expect a breakthrough in inflationary growth in the near future, in particular due to the fact that part-time work implies a lower level of wages. There is another cause for concern: we are talking about the indicator of confidence in the business environment from NAB (National Australia Bank). According to analysts from the largest Australian bank, consumer confidence fell to zero in September. This is despite the fact that over the past four months the figure has been consistently and quite rapidly declining. This result is due to the difficult relations between the United States and China, as well as a decrease in the commodity market (primarily iron ore).

In other words, traders should prepare for the next round of interest rate cuts. Firstly, the head of the Reserve Bank of Australia, Philip Lowe, hinted at this. He made it clear that the regulator is ready to continue to respond to the decline of key indicators, "playing ahead of the curve". Lowe did not push himself and his colleagues into any time frame, but the market is confident that by the end of the year the RBA will still lower the rate to 0.5%. In the framework of 2019, two more meetings will be held - November 5 and December 3. According to the general expectations of traders, the actions of the regulator will depend on the results of the US-Chinese negotiations. If they fail, then with a high degree of probability the rate will be reduced in November. Otherwise, the corresponding decision will be made at the December meeting, taking into account the dynamics of key macroeconomic indicators.

It is worth noting that Philip Lowe is skeptical of incentive programs (which are adopted by, in particular, the Bank of Japan and the ECB), therefore, the Australian central bank will respond to external challenges only by reducing rates. Thus, the focus of the AUD/USD traders is still on the US-Chinese trade negotiations, on the outcome of which, in fact, depend on the prospects of the monetary policy of the RBA.

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If the outcome is positive, the pair can impulsively jump to the resistance level of 0.6880 (the upper boundary of the Kumo cloud, which coincides with the upper line of the Bollinger Bands indicator on the daily chart). But the main goal of the upward movement will be the mark of 0.7000 - only when it is overcome can we talk about a trend reversal. But if the parties again disperse "in the corners of the ring" without any agreement, the aussie can again test the lows of this year, dropping to the area of 0.6670, that is, to the lower line of the Bollinger Bands indicator on D1.

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

Gold relies on trade failure and Fed easing

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Despite the correctional decline that followed last month, gold is still trading near multi-year highs.

The focus of market participants is the resumption of trade negotiations between Washington and Beijing.

Although the parties took a step towards each other (US President Donald Trump shifted the deadline for raising duties on Chinese goods from October 1 to October 15, China began to buy more agricultural products from the United States), but it's premature to say that they will conclude an agreement. Both China and the United States have strong leaders who do not intend to retreat.

Obviously, the protectionist policies of the White House did not bring America any preferences. The US trade deficit in August increased by 7% in annual terms. The US president failed to achieve either an improvement in the state of foreign trade, or a 3% increase in national GDP. Therefore, he is likely to bet on an agreement with China. Apparently, the latter understands this and is trying to capitalize on the lower political rating of Donald Trump, who is under the impeachment sword of Damocles. No one knows how the case will end.

October 10-11, the first dialogue between trade representatives of China and the United States will take place in recent months.

Traders fear that if the parties are unable to make progress in the upcoming negotiations, then trade tension will intensify, which will put additional pressure on the entire world economy, the growth rate of which is already slowing down.

For gold, negative news from the trade front is always positive.

The dynamics of the US dollar and, accordingly, precious metals are also influenced by the monetary policy of the Federal Reserve.

With a reduction in the Fed interest rate, the exchange rate of the US currency tends to decrease, and the price of gold rises.

Last Monday, the president of the Federal Reserve Bank of Minneapolis Neil Kashkari said that he was pleased that the US central bank is lowering the rate on federal funds.

"My position is clear: we must support the economy with the help of monetary policy, and not slow it down," he said and added that he did not know how much the Fed should lower the rate.

It is assumed that if the Fed continues to soften monetary policy, gold will continue to rise in price up to $1,900 per ounce.

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

GBP/USD: Brexit deal on the verge of failure, and the pound on the verge of collapse

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The British currency could fall to $1.15 or even to $1.10 against the US dollar, if the United Kingdom leaves the European Union on October 31 without an agreement.

"If Great Britain manages to extend the delay in quitting the European Union before the deadline is set, then a slight positive reaction can be observed in the dynamics of the pound. In this case, the GBP/USD pair will consolidate in the range of 1.20–1.25," the analyst said.

"If the UK achieves a deferment and forms a non-socialist government, sterling could go up to $1.30," he added.

It should be noted that the last time for 1 pound was given less than 1 dollar and 15 cents in the distant 1985.

Nearly no one believes that an agreement on the Brexit conditions between the EU and UK can be concluded until October 31.

Recall, the day before, German Chancellor Angela Merkel said that Northern Ireland should remain part of the EU customs union. The Prime Minister of the United Kingdom, Boris Johnson, said in response that this condition, along with the EU's reluctance to meet its latest deal proposals, is paving the way for a no-deal Brexit. At the same time, EU representatives made it clear that they were ready to discuss the postponement of Great Britain's withdrawal from the EU.

"We think that the UK will nevertheless ask for another Brexit postponement and hold early elections in late November – early December," analysts at ING said.

"This delay can be granted for a period of more than three months, and this time should be enough for the new British government to find a common language with the EU," they believe.

"If parliamentary elections in the United Kingdom take place earlier, then the British currency will be under pressure. In this case, Conservatives can get a majority in Parliament, which will increase the likelihood of a hard Brexit and increase the risk premium for owning the pound. In this scenario, GBP/USD should fall below 1.20, as well as a retest of EUR/GBP at 0.93. Strengthening the risks of a disordered UK exit from the EU will limit the growth potential of EUR/USD and adversely affect the segment of European currencies as a whole," said ING.

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