The growth of positive sentiment on world markets on Friday provided significant support to the US dollar, including the general demand for risky assets and the increase in the yield of American treasuries.
The reason for such a rosy mood was the news about the progress of the "first phase" of the negotiation process between Washington and Beijing. Moreover, this was confirmed by both parties. The American trade representative described this step in the negotiations as making progress on specific issues. He also stressed that another meeting is expected in the near future.
In the wake of this news, trading on stock markets in the United States and in Europe ended in the green zone as a whole. These positive sentiments were also supported by trading in China during the Asian trading session. Therefore, investors' hopes that a new trade agreement could be signed next month led to an increase in the dollar exchange rate on the currency market to a basket of major currencies. In addition, yields on US government bonds also turned up, but the gold price jumped up on Friday morning and almost lost its entire profit-taking growth.
In general, if we pay attention to the dynamics of the yellow metal, the two-day growth in quotations was more similar to the local purchases of individual market players, since its sharp increase was not supported by a weakening of the yield of American treasuries, or a general increase in the demand for protective assets, including the Japanese yen and Swiss franc, as well as, importantly, noticeable volumes. Of course, the dynamics of gold at the moment completely depends on the general expectations of the progress market in the negotiations between the US and China, as well as the position of the Fed regarding the future level of interest rates. Thus, we believe that if some negative factor doesn't collapse again, gold quotes can smoothly adjust to the lower boundary of a wide range of 1476.80-1510.00, but for this to happen, they should technically decline below the psychological level of 1500.00.
We highlight the Fed meeting on monetary policy as one of the most important events this week. The key interest rate is supposed to be lowered by 0.25%, but at the same time, the regulator, represented by its leader J. Powell, can make it clear that there will be a pause in the further reduction in rates. Against this background, we can expect a local strengthening of the position of the US dollar.
Forecast of the day:
The EUR/USD pair is slightly correcting upwards after a noticeable fall on Friday. The price may increase to the level of 1.1100. If it does not overcome it, there is a possibility for the price to turn down to 1.1060.
The AUD/USD pair remains under pressure amid expectations of a decline in RBA interest rates. It can be assumed that if the pair falls below the level of 0.6810, it will continue to fall to 0.6800, and then to 0.6775.
