GBP/USD. China is deliberately "finishing off" America, seeking a change of power in the country.

24-hour timeframe

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Over the past week, the British pound has also continued to rise in value in pair with the US currency and this is the most surprising event (from our point of view). We believe that the only reason that can explain it is the technical need for correction. Although the current movement can not be called a correction in the literal sense of the word, nevertheless, technical factors can be named as the reason. The fact is that no important news or reports are coming from the UK at the moment. Not to mention positive messages and strong statistics. Thus, traders simply cannot buy British currency based on the fundamental background of the UK. Thus, the fundamental reasons can only be hidden in the United States. On the one hand, it would seem that the answer to the question is obvious and lies on the surface – rallies and protests have been raging in America for two weeks in a row. Despite the fact that it was initially stated that police stations were burned, pogroms, and looting, in most cases these are really completely peaceful rallies. However, the reaction of traders to them could be exactly this - the sale of the dollar. However, in the article on the euro/dollar, we have already asked a reasonable question: why is the Swiss franc almost not getting more expensive when paired with the dollar, and the yen is getting cheaper at all? There may be two answers. Either market participants use only the euro and pound as assets after exiting dollar positions or the "foundation" has nothing to do with it at all. If the first option, then the question arises, why again the pound? If there are a much more stable Japanese yen and Swiss franc, which are often used for protection? Thus, we believe that the basis for the growth of the British pound is a little bit of everything. And if so, this process can end at any time, unless really important and serious information is received from the US, which will force traders to go to new sales of the US currency.

And potentially such information could have already been made available to traders last week. The fact is that the Chinese authorities have instructed Chinese companies to stop purchasing certain categories of agricultural products in America. Immediately after that, China also received reports that companies still continue to purchase American products, but no one can say for sure whether China continues to adhere to the agreements reached and signed on January 15, 2020? If official Beijing has given such an instruction, it has already questioned the implementation of agreements with Donald Trump. Given the fact that we have previously written about China's desire to terminate the first phase of the trade agreement due to the "coronavirus" pandemic and the global crisis, it all looks true. And if so, this is a new blow to America and personally to Donald Trump. The fact is that a country like America will certainly withstand such a blow from Beijing as a refusal or reduction in the volume of purchases of agricultural products. Of course, American farmers will not have a sweet time, they will have to provide support, but still, the world's largest economy will withstand such a blow. The termination of the trade deal now will be another blow to the American economy, which, unlike the Chinese one, will lose up to 10% in 2020 and it will further hit Trump's political ratings, which have already suffered so much in recent weeks. Thus, we are talking about the fact that China is seeking to strengthen its role in the international arena, as well as "finishing" Donald Trump personally, so that he will not be re-elected in November 2020 in any case. After all, if you look at the situation as if from the outside, it was China that dealt America the strongest blow with the "coronavirus". It is clear that the whole world suffered, but America also suffered, which, in principle, was what Beijing needed (we do not say that the spread of the virus was intentional).

It should also be noted that it is American farmers and private households, which depend very much on agricultural exports, and are the main electorate of Donald Trump. If China stops purchasing these products or reduces the volume, it will cause great frustration among farmers, who may refuse to choose Trump as the next president of the country. In addition, the country has been in a trade war with China for two years, and the shaky truce that was reached in January may collapse in June. And if it collapses, then it turns out that the American government has not made any progress in the confrontation with China, which has been trumpeted for a long time. There is no result, except that both sides will again impose duties and sanctions on each other, from which in most cases ordinary citizens will suffer. And on this issue, it should also be noted that American businesses are also suffering from a trade war with China. And if business suffers, it means that it will support someone who can improve relations with China, that is, Joe Biden.

Thus, all this means only one thing. Any attempts by Trump to impose sanctions against China, Chinese companies, Chinese officials will somehow be followed by a response. At the same time, it is completely unclear when and in what form it will follow. But Beijing will definitely not remain in debt. It may seem that Beijing is taking a weaker position in the confrontation with Washington. However, it is not. Beijing simply makes much less official statements, in other words, Beijing shouts and threatens much less. However, it also has plenty of tools to put pressure on the US. Thus, there is no doubt that any attempts by the White House to expel Chinese companies from American stock exchanges, to impose sanctions against Hong Kong, against Beijing, and against financial corporations will definitely provoke retaliatory measures. This means that both the world's largest economies, as well as the entire world economy, will continue to suffer from the confrontation of two giants who cannot agree between themselves. At least as long as Donald Trump is President of the United States.

In our view, the British pound may continue to strengthen if a new escalation of the conflict between China and the United States occurs in the near future. However, if this does not happen, the pound will likely start a new decline. As before, we do not recommend trying to guess the pair's turn down, but rather follow the trend. Moreover, both trading systems that we regularly review the pair for are trend-oriented ("Ichimoku" and "linear regression channels").

Trading recommendations:

On the 24-hour timeframe, the pound/dollar pair started a new upward trend. Thus, it is now recommended to consider long positions with the goals of resistance levels 1.2865 and 1.3129. It is recommended to keep the longs open until the pair begins to show signs of a downward turn, which is best tracked on a 4-hour timeframe.

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

EUR/USD. Donald Trump vs Joe Biden vs "Coronavirus". The American president dug a hole himself.

24-hour timeframe

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On the Forex market, another trading week has ended, during which the European currency has risen in price in an unprecedented way in pair with the US currency. If you do not take into account the first six weeks of the "coronavirus" epidemic, when almost every currency was thrown from side to side by hundreds of points, it is difficult to even remember the last time the euro increased so strongly and quickly. As we have already said, the reasons for this strengthening of the euro currency are ambiguous. If we take into account the fact that the pound has also become more expensive, we can conclude that the US currency has fallen. If this hypothesis is correct, then why, for example, the Swiss franc fell in price over the past week much more modestly? Why is the Japanese yen generally cheaper against the dollar? It turns out that rallies and protests in the US do not have such a strong impact on the demand for the dollar. Or do market participants sell the dollar based on these events, and buy only the pound and the euro, although in this case, the question remains: why do they buy the pound, which is clearly one of the weakest currencies in recent years with absolutely vague prospects? There has been no reason to cheer from the UK in recent weeks, so why is the pound in demand? In general, what is happening now in the market is very difficult to explain logically. Yes, formally, any movement of any pair can be "tied" to some fundamental or macroeconomic event, however, this is more called "pulling by the ears". No one denies that the events in the US have had an impact on the foreign exchange market, but this impact is very ambiguous.

Since we have already figured out that the rallies and protests in the United States, caused by another racist scandal, are not the main reason for the fall of the dollar, it remains to find out what is the reason? And there are quite a large number of topics claiming to be "reasons". First, we believe that for the rest of 2020, the most important topic will be the election campaign and the US presidential election. If you try to judge from the US side, it will be better if Donald Trump loses the election. The current US president is an excellent businessman, but as the leader of the nation, he is unlikely to be remembered by Americans with a good side. Further US foreign policy will depend on whether Trump wins or loses (Joe Biden can count on establishing ties and dialogue with China), which is now expressed in the phrase "we will threaten everyone, let everyone dance to our tune". We can all clearly see what this strategy has led America to. Secondly, while the US president has not yet been replaced, this is the topic of the confrontation with Beijing, which is getting hotter and hotter every day, but it has not yet "exploded". Today we will focus in detail on the first topic.

If the whole world was not covered by the epidemic, then America would have already begun and was preparing for elections. It's time for both presidential candidates to travel around the states, hold rallies, and attract voters to their side. However, the coronavirus pandemic has made its adjustments. Before the outbreak of the epidemic, Donald Trump's ratings were high, however, Joe Biden was also nearby. When the epidemic began, Donald Trump poured arrogant statements in his style every day and in all directions. Then the American president said that the virus will not survive even April. Then the US leader said that the Americans have nothing to fear. However, as it turned out just 2 months later, there was something to fear. The number of deaths from the COVID-2019 virus in the United States at the moment is about 100 thousand people. Also, at least 25 million people lost their jobs in the country due to the quarantine. The US Congress and the Fed had to pour trillions of dollars into the economy, while Donald Trump continued to pour statements in the style of: "I will build a country even stronger than it was before the pandemic." But even though the current crisis is visible to the naked eye, and is visible to every American, Donald Trump still had fairly high political ratings, about 45-49%. That is, literally until recently, most Americans were happy with the way the authorities cope with their responsibilities. However, after Trump began actively promoting the idea of restarting the economy and ending the quarantine, his support among the population began to decline. Here you should understand the motivation of ordinary Americans. No one wants to risk their health and the health of their loved ones at a time when the pandemic has not even begun to wane. Thus, the decision of the leader of the nation to open most of the states and reopen most of the enterprises was not received by the Americans "with a bang". Of course, some were happy about the end of the quarantine, but most people still understand the danger of such measures. And what do we see now, a few weeks after the US economy eased quarantine measures? According to the Johns Hopkins Institute, the disease growth curve in America continues to steadily show an increase. That is, the rate of growth of the virus spread across the ocean is not slowing down, and the total number of cases of diseases is already 1.9 million. For example, in Spain and Italy, the most affected EU countries, the authorities first waited for clear signs of slowing the spread of infection and only then began to ease the quarantine. As a result, the "contagion curves" in these countries go sideways, meaning that the spread of the virus slows down. There are fewer and fewer new cases of infection.

Thus, there is already an opinion that Trump hastened to "open" the US economy, and this rush will cost new lives to Americans. Well, the racist scandal that broke out in the United States in recent weeks showed Trump again not on the best side. First, according to polls, most Americans consider Trump a racist. Secondly, the US president proposed to disperse peaceful protestants and protesters with the help of the army, showing his utter disrespect for human rights. Well, the main competitor of Trump in the election race, Joe Biden, has been in the shadows all this time, only a few times giving interviews to various media and television. And according to the latest sociological research, it is Biden's ratings that are the highest. By and large, it turns out that Donald Trump "dug a hole" for himself. And Joe Biden has done nothing to increase his support among the electorate. However, Trump's ratings have fallen and Biden's have risen. So, if there is anyone to bet on now, it is the democratic candidate. Biden's only downside is his age. In the fall, the Democrat will "turn" 78 years old.

Trading recommendations:

On the 24-hour timeframe, the euro/dollar pair worked out the resistance level of 1.1381 and rebounded from it, starting the long-awaited correction. Thus, the correction movement to the critical Kijun-sen line may continue in the new trading week. Further upward movement of the euro currency is still in doubt. However, overcoming the level of 1.1381 (or signals from the 4-hour timeframe) allows traders to trade again for an increase with the goal of 1.1618 (or goals for the 4-hour timeframe).

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

EURUSD remains in bullish trend but could see early pull back next week

EURUSD is breaking to new short-term highs. Price is in a bullish trend and is making higher highs and higher lows. EURUSD has reached a major resistance trend line while the RSI on a daily basis is now in overbought levels. A pull back is justified early next week.

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Red line - major resistance trend line

Black lines- bearish channel

EURUSD has reached the major resistance trend line. The RSI is at overbought levels. Price will most probably pull back next week after the sharp rise from 1.09 to 1.13. EURUSD should normally pull back towards 1.12-1.1150 area. Such a pull back would not do any harm to the bullish case.

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EURUSD is expected to pull back towards the 38% Fibonacci retracement area. EURUSD will most probably pull back towards the rising tenkan-sen (red line indicator) and the kijun-sen (yellow line indicator). For now these two indicators provide support at 1.1120-1.11 near the upper cloud boundary. It is common to see prices pull back for a back test after a cloud break out. However I do not believe at this stage the pull back will be so much deep. There is no bearish divergence even in the 4 hour chart and that is why I believe any pull back will be short-lived.The material has been provided by InstaForex Company - www.instaforex.com

Short-term Ichimoku cloud indicator analysis of Gold

Gold price got rejected at major resistance on Friday and pulled back towards our first target at the upper cloud boundary. Gold price reached our $1,670 pull back target given after the initial break below the tenkan-sen and kijun-sen indicators.

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Gold price bounced and bulls tried on Thursday to push price above the tenkan-sen and kijun-sen indicators. Resistance at $1,720-25 was very strong and bulls were unable to break it. The Daily candlestick closed below the resistance giving the opportunity to bears to go short with a tight stop. Resistance was confirmed. Friday was dominated by bears. Price confirmed the rejection at the resistance by the two indicators and price reached the upper cloud boundary which was our initial target. Bouncing off the cloud would be a bullish sign. Resistance is at $1,720. Bulls need to reclaim this level in order to hope for a move towards $1,800.The material has been provided by InstaForex Company - www.instaforex.com

Threat of dollar hegemony, or financial weapons of mass destruction

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Recently, the Chinese government launched testing a digital version of its national currency, which is likely to be more widely used at the Beijing Winter Olympics in 2022.

Some experts believe that the digital yuan can not only strengthen government control over the country's financial system, but even change the balance of power in the international economic arena.

"Most of the money that is exchanged electronically is just loans and debits on accounts with different banks. Digital cash in China is designed to be an electronic version of a banknote or coin. It just lives in a digital wallet on a smartphone, and is not in a physical wallet. The value of the digital renminbi will be provided by the state. Virtual money will be quickly circulated in the economy and also easier to use than paper money, and will also give Chinese authorities a degree of control that cannot be obtained with physical money," Bloomberg analysts said.

"In addition, a payment system based on this kind of digital banknote or coin does not depend on the financial condition of banks, their credit rating and interaction between each other. At the same time, the state has full transparency of all payments almost in real time, as well as the ability to use the data to fine-tune the economy. And most importantly, there are no technical restrictions that would prevent the system from being taken outside China, " they added.

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It is known that the digital renminbi testing program started in April in Shenzhen, Suzhou, Chengdu and Xiongang.

Although launching across the country is likely still a long way off, China's actions have raised concerns about a new threat to US financial dominance.

In particular, Aditi Kumar and Eric Rosenbach of the Harvard Kennedy School argue that the digital version of the renminbi could ultimately allow Iran and other countries to avoid Washington's sanctions or transfer money outside the control of the US government and dollar-denominated international payment systems.

However, this does not bother everyone. Former US Treasury Secretary Henry Paulson believes that, despite China's plans, the threat to the dollar's status as the main world currency does not raise serious concerns.

"Even if the digital yuan turns out to be very mobile, the dollar will still be trusted, and oil and other key commodities will still be priced in the US currency," he said.

Of course, at the moment, a mass exodus from the dollar is unlikely. However, if the digital yuan is ubiquitous, it may push countries and people living abroad to join Chinese technology and ultimately the new currency.

"It is possible that other countries will use the Chinese scheme, and then the pioneer's advantage will turn into a serious network effect," said Matthew Graham, director of Beijing-based Sino Global Capital.

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