The lack of agreement by the US with Canada on free North American trade (NAFTA) showed that the northern neighbor of America is not ready to agree to any agreement, which indicates that the existing contradictions have not been overcome, and whether they will be overcome in the near future, remains under question.
On Friday, the US dollar gained appreciable support in relation to the major currencies on the wave, on the one hand, the failure of expectations for the soonest conclusion of the NAFTA agreement between the States and Canada, and on the other - the return of the understanding that the trade relations between America and China will not be soon overcome. Therefore, the preservation of the global braking risk factor will still prevail over the markets.
Yes, the US managed to "pin down" Europe, force it to go for favorable trading conditions for them. But, as we said earlier, this number will not pass with "the Celestial", and therefore we continue to believe that the threat factor for the prospects for the growth of the world economy will remain at least in the near future, so the demand for protective assets will take place alternating with periods of hope that, nevertheless, this problem will be solved.
Assessing such prospects, we believe that the US dollar will continue to move in the sideways range against major currencies. It will be supported by the continuation of the flow of capital to the US from emerging markets, an increase in the interest rates of the Fed, the closest of which will be held at a meeting of the regulator at the end of this month, as well as its function as a safe haven, which investors resort to during periods of instability and a fall in demand for risky assets, as well as shares of companies and assets of commodity and raw materials market. That the lack of agreement between Canada and the US again frightens the markets is clearly manifested not only in the growth of demand for the dollar but also in government bonds of the US Treasury with the Japanese yen and the Swiss franc.
Today in the US and Canada, a day off is a holiday of labor. Local markets will be closed, so investors' activity will also be noticeably lower. We expect that on this wave the dollar may adjust slightly against the major currencies. We consider it necessary to use this in order to buy it again on a decline.
From the important economic data, let us single out the publication of the values of the index of business activity in the manufacturing sector of Great Britain, Germany and the eurozone. We should also pay attention to the outcome of the meeting of OPEC members and the speech of the head of the Bundesbank Weidmann and a member of the FRSM Evans.
Forecast of the day:
The EUR / USD currency pair is trading above 1.1590 on a wave of partial profit taking amid a weekend in the States. If the data of the index of business activity in the manufacturing sector of Germany and the euro area are above expectations - this could push the pair up to 1.1640. We consider it possible to sell it from this level with the goal of 1.1535 or after crossing the price level 1.1590 with the same target mark.
The GBP / USD currency pair is trading above 1.2910. We consider it possible to sell it if the price does not rise above 1.2935 and fall below the level of 1.12910 with the target of 1.2860.
