The results of last week showed the correctness of our view of the developing events around the trade wars and their positive impact on the US dollar rate.
Earlier, we repeatedly pointed out that keeping the Fed rate for the continuation of the cycle of raising interest rates and, in fact, the absence of such a rate from other major world banks will stimulate the strengthening of the dollar, which, in fact, is observed until the latest moment. At the beginning of the year, this pressure on world currencies was first restrained by the policy of uncertainty of D. Trump, which caused its local weakening and many investors in the markets believed that the ECB, the Bank of England, and even what "scary" to imagine, the Central Bank of Japan, the American counterpart, will also change the course of their monetary policy towards tightening.
However, with the increase in tension due to the trade wars that America has unleashed, as well as the apparent reluctance of the above-listed central banks and many others whose currencies are traded against the dollar on Forex, we follow the Fed on the path of raising rates. The dollar began to gradually strengthen its positions. Here, additional support is provided by the revived traditional function of the currency safehaven, which became even more visible during the aggravation of the trade war between the US and China.
Last week showed that the dollar rally is increasing, along with the whole front. The fear of investors over the probability of a new recession pushes them to buy protective assets. This is already the dollar as mentioned above, as well as the Japanese yen, which is the only currency growing in relation to it. Besides them, of course, such a function is performed by the Swiss franc and government bonds of economically strong countries - the USA, Germany and others. Thus, the profitability of the benchmark of 10-year T-Note has fallen from a maximum of 3.016% to 2.853% since the beginning of the month, which indicates increased purchases of bonds.
Observing the picture on the world markets, we note that, most likely, the further strengthening of the dollar will continue, as the main negative - the escalation of the trade conflict between Washington and Beijing - will not disappear anytime soon and the entry into force on August 23 of new US customs duties for "China "are unlikely to contribute to the normalization of the situation.
Forecast of the day:
The EURUSD pair is growing on the wave of profit taking. Perhaps it will recover to 1.1430 or even higher, to 1.1450. However, it is most likely that it will continue its fall after the rebound. We consider it necessary to sell the pair on growth from 1.1430 and 1.1450 with a probable local target of 1.1300.
The AUDUSD pair is also restored at the close of some short positions. If it fixates above the 0.7285 mark, there is a probability of its local growth to 0.7325. We consider it possible to sell it both on growth from 0.7325, and on the fall below the level of 0.7265 with the target of 0.7240.
