Following the stock market's decline from yesterday, in the wake of the new-old threats by the US president to raise trade duties on Chinese exports, the markets calmed down somewhat, but still, as they say, left hanging in suspense.
Although investors believe that D. Trump's threats are just words, because too many opposing sides have invested their strength and financial resources in mutual trade relations, the risks of Trump's neurotic and perhaps even inadequate behavior can lead to a breakdown in negotiations and escalation of the trade conflict between Washington and Beijing, which will grow into a full-scale trade war.
In the foreign exchange market, a major role is now played by the continued dominance of the uncertainty factor in the wake of the Fed's position, which the regulator took at the end of its May meeting on monetary policy. The bank clearly made it clear that there would be no repetition of the quantitative easing program in the form in which it was after the acute phase of the 2008-09 crisis, but it signaled that it could proceed to a repo maneuver in the form of repos for commercial banks maintaining dollar liquidity in the financial system. Now this topic is being worked out.
The fact that the Fed is looking for a way out of the pit into which it drove itself and the national economy stimulating post-crisis actions, can be seen with the naked eye. It is looking for an opportunity to maintain the interest primarily of foreign investors in the US stock market, as it understands that if it falls – it can be a signal for selling, which will escalate into a collapse and ultimately into a new, probably even more severe financial crisis in the country as well as in the world.
That is why there is no specific dynamic in the currency market. Markets wait and hope, then become frustrated and hope again. This situation seems to last more than a month.
Forecast of the day:
The EURUSD pair is likely to remain in the range of 1.1125-1.1260, in anticipation of whether Trump's decision to increase duties for China will happen or not this week. If, from a technical point of view, the price stays above the level of 1.1200, it can continue to grow to 1.1265. At the same time, its decrease below this mark may lead to a local price fall to 1.1125.
The AUDUSD pair is approaching a strong resistance level of 0.7065. The pair could move down if the trade agreement between the United States and China fails, and this level stands. In this case, the pair could drop to 0.6965.
