The ending of 2018 is marked by increased investor attention on stock indices. The collapse of the S & P 500 with subsequent attempts by the US administration to stabilize the situation did not leave indifferent participants in the FOREX market. Asylum assets in the face of the Japanese yen and the Swiss franc were especially popular. On the contrary, the US dollar lost ground. However, the "bulls" of one opponent's weakness will not be enough to continue the EUR / USD rally. We need our own trumps but you do not find them in the afternoon with fire.
The thin holiday market may turn into a loss of 9% or more for the US stock indices for the month, which, for example, for the S&P 500 will be the worst dynamic since the crisis. After all, it was precisely the high demand for papers issued in the United States that became the catalyst for the rally of the USD index in April-November. Compared with the global MSCI, "Americans" looked better for most of the year, which stimulated a flow of capital to the United States and contributed to the strengthening of the dollar. December sales led to a drop in liquidity below critical levels and forced US Secretary of Finance Steve Mnuchin to intervene.
Dynamics of liquidity and stock indices
And yet, there is logic in the words of Donald Trump, who asserts that a strong stock market indicates a strong economy. It is precisely because of the advancing dynamics of the S & P 500 over the global MSCI for most of the year the US dollar has been growing. Will it be strengthened in 2019? The answer depends on which they want to lose speed faster, the US GDP or the global economy? The fading of fiscal stimulus, political dysfunction, threats to the independence of the Fed and the disabling of the US government increase the likelihood of a first scenario. But who knows what protectionism and import duties will turn for the eurozone, China and other countries.
Under current conditions, it is best to rely on US macroeconomic statistics. And it's not just the Fed's intention to make decisions based on incoming data. The point is the speed at which the American economy switches from fifth gear. If on the fourth, the dollar will continue to feel like a king. On the third or on the second, they will get rid of it as if they were tired toys. It should be considered that the economic calendar may be amended at any time due to temporary downtime of the executive. In this regard, important releases, including on the labor market in December, may come out somewhat later than is currently expected.
The growth of EUR / USD is associated not only with the closure of long positions on the US dollar. There are rumors in the market that at the slightest positive, the ECB will begin to normalize monetary policy. If a crisis happened in the Old World, he would not have enough firepower to resist.
Technically, the implementation of the combination of the "Three Indians" and "Splash and Regiment" patterns reinforces the risks of continuing the EUR / USD rally towards the target by 88.6% based on the Shark model.
EUR / USD daily chart
