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EUR/USD. Results of the day: Trump's resonant performance and strong ADP report

The euro-dollar pair succumbed to panic today, amid another round of confrontation between the US and Iran. And although the anti-risk sentiment in the foreign exchange market began to weaken in the afternoon, demand for the US is still preserved, judging by the dynamics of the dollar index. In addition, the pair came under pressure from an informal report on the US labor market - data from ADP came out in the green zone, supporting the growth of the greenback.

Nevertheless, short positions on the EUR/USD pair now look quite risky. The behavior of defensive assets suggests that the demand for safe haven instruments has significantly declined (for example, look at the dynamics of the yen paired with the dollar). This suggests that the position of the dollar is now also quite precarious. In addition, the EUR/USD bears could not leave the frame of the 11th figure, despite the impulsive price movement, which made it easy to pass the support level of 1.1140 (the middle line of the BB indicator on the daily chart). But then the downward impulse slowed down - sellers feel counter resistance, which is due to the activity of buyers. In the face of such uncertainty, it is advisable to take a wait-and-see attitude, especially in anticipation of the release of official data on the growth of the US labor market.

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The main event of the day today took place in the large foyer of the White House - there, at 11:00 UTC, the US President spoke on recent events in the Middle East. Let me remind you that last night the US military bases deployed in Iraq were subjected to rocket fire. Iran thus avenged the United States for the death of its high-ranking military leader General Soleimani. In connection with this event, anti-risk sentiment significantly increased - CNN reporters spread rumors that Trump will appeal to the nation, during which he will announce the start of a full-scale war. A little later, the White House denied this information, but at the same time announced an "important" statement by the head of state.

Throughout the day, experts argued whether the US president would decide to retaliate or limit himself to economic measures, thereby taking a step toward de-escalation of the conflict. Based on the results of Trump's speech at the White House, a trivial, but rather unambiguous conclusion can be made: there will be no open and full-scale war. At least in the near future.

The US president said that no one was hurt when Iran attacked the US military base, so Washington will not resort to retaliatory measures of a military nature. He also said that "powerful sanctions" would be imposed against Tehran, which could be lifted in case of "good Iranian behavior". The head of the White House also walked around his political opponents - the Democrats - accusing them of having concluded a nuclear agreement with Iran. And although in the concluding part of his speech, Trump reminded his enemies of the military power of the United States, in general, his speech was peaceful and conciliatory. The titles of online publications following his speech were filled with headlines that "World War III is being canceled." The foreign exchange market also responded to the speech of the American president: defensive assets and commodity currencies significantly fell, while the dollar remained virtually in the same position.

It is worth noting that the US currency today is kept afloat due to the strong ADP report. According to published data, in December, 202 thousand jobs were created in the US private sector. This is the highest result in the last seven months. The components of the report in the production sector, both services and goods, have grown most strongly. The manufacturing sector also showed significant recovery. In other words, a very good signal sounded today in the form of a strong report from the ADP agency, which is a kind of "petrel" ahead of Nonfarms.

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Now the market is waiting for the main macroeconomic report of the week, which will be published on Friday. If the official figures repeat the trajectory of data from ADP, the dollar will again get on the horse. To date, a consensus forecast for official data suggests that the labor market will show growth in December: 150,000 jobs created with unemployment at a record low of 3.5%. A certain intrigue regarding Friday data remains, although dollar bulls can now count on exceeding forecast values. A separate line should be paid attention to the inflationary component of Nonfarm - an indicator of the average hourly wage. A month ago, this indicator came out at the level of 0.2% MOM and 3.1%YOY. This is a good result, and for the bulls of the pair it is important that tomorrow's release confirms the positive trend. Nonfarm's inflationary component is now extremely important for EUR/USD traders, even outside the context of an increase or decrease in the number of employees.

Thus, the dollar continues to dominate the EUR/USD pair - a strong ADP report and lower risk of a full-scale war with Iran made it possible for dollar bulls to decline to the bottom of the 11th figure. But while the bears of the pair did not conquer the 10th figure, it is too early to talk about the development of the downward trend. At the moment, it is advisable for the pair to take a wait-and-see attitude - at least regarding the release of data on the growth of the US labor market.

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