The US dollar strengthened its pressure on foreign exchange markets, due to several reasons that dominated the markets.
After some "stumbling" in place, the dollar again began to receive support on the wave of several sustainable causes. First and foremost is the factor of the trade wars, in which the American currency is seen as a tool to avoid risk. On one hand, it is bought to wait for the uncertainty in which the currency is in demand as a safe haven. On the other hand, it is bought in order to then acquire a defensive asset in the form of government bonds of the United States Treasury. The dynamics of the Treasury are bright at this point.
So, by the end of this month, the ICE dollar index increased from the level of 93.97 points to 95.24 points against a basket of major currencies. At first it may seem that this increase is insignificant but if you pay attention to those events that happened this month, and they "turned" around the decision of the Fed to raise interest rates and the beginning of trade wars between the States and most of their trading partners, it becomes clear as to why the rate grew so slowly. Against the backdrop of these events, the dollar was getting support, then, on the contrary, it was under pressure. However in the end, this old property of currency asylum "triumphed". It, on one hand, is bought on the wave of exit primarily from the currencies of developing countries, as well as the understanding that the process of divergence in interest rates between the Fed and the Central Bank of economically developed countries will most likely continue, which plays in favor of the dollar. On the other hand, the dollar is bought in order to then buy US government bonds. This is done in order to avoid risk and sit out in reliable state securities a period of turbulence, caused primarily by the factor of trade wars.
The fact that the world's Central Bank and other regulators of the economically developed countries should not expect changes in monetary policy confirmed the outcome of the meeting of the Reserve Bank of New Zealand, which decided to leave the key interest rate at the previous level of 1.75% and at the same time signaled that it was not in the nearest foreseeable the future. This is to count on its change not only upwards, but also downwards.
Watching the emerging picture in the foreign exchange market, we believe that the dollar has good prospects for growth against the currencies of developing countries, as well as major currencies. Its increase will be accompanied by kickbacks on the background of profit taking, but a stable growth dynamics will most likely persist.
Forecast of the day:
The EURUSD pair adjusted upwards against the background of profit taking. Perhaps, it will recover to the level of 1.1585. If it stands, there is a probability of the pair turning and its further decrease to 1.1515 and to 1.1440.
The NZDUSD pair fell below the strong support level of 0.6790, which was held from the fall of 2016. If the price is kept below it, there is a possibility of continuing the decline to 0.6680 after correction to 0.6790.
