The United States stock exchange started to recover its positions, favorably affecting the characteristics of the dollar index. The other day, the stock exchange closed with development– the Dow Jones grew by 2.1%, the S&P 500 index increased by 2.15%, and the NASDAQ Composite– by 2.89%. In general, shares increased in cost in the sphere of healthcare, customer services and innovations. In the context of the foreign exchange market, the really fact that the stock market grew is crucial, especially
after the events of last week.< img width ="450"src=" http://qkfx.com/wp-content/uploads/2018/10/eur-usd-a-pair-at-the-crossroads-either-1-1620-or-1-1460.jpg "alt =" fH2zZU1SM9MFAbZojtXjQsOtQRdRjluT4Y4NORqo "/ > Let me advise you that the stock markets not only in the US, however in a variety of Asian nations at the end of the last 5 days have slumped rather sharply, triggering panic among traders. Donald Trump managed to blame the Federal Reserve, whose members, in his viewpoint, “went nuts”, raising the rate of interest. Well, as a “bonus” to all this really weak data on inflation in the United States was launched, which matched the dismal photo. As an outcome, the marketplace began to question that the Fed will accelerate the rate of monetary policy tightening up next year– and the possibility of a rate hike in December fell from 82% to 75%.
The future habits of the stock market was of excellent importance for traders of the currency market, and especially for dollar bulls. A regression of the collapse or a more decline would show a trend that the Fed might no longer neglect. But, obviously, the situation was settled– a minimum of at the minute. And considering that the foreign exchange market, as a guideline, lives “today”, the dollar index suspended its decrease and settled at the borders of 95 points. The yield of 10-year treasuries, which straight provoked the collapse of stock exchange, began to decline gradually, although at the moment still exceeds the three percent limit.
Simply put, the marketplace has become more cautious of the dollar (compared to the period of September), but at the same time the greenback has actually not lost its appeal, as the possibilities of a December boost are still high. The weekly CFTC reports validate the continued demand for the US currency, while speculators continue to eliminate the euro.
Such circumstances do not enable the EUR/USD to overcome the essential resistance level of 1.1620, although the bulls of the pair have consistently checked the 16th figure in recent days. However even the weakened dollar was stronger than the euro, which has “luggage issues” no less: from the long narrative on the budget of Italy, ending with an uncertain prospect of Brexit. Therefore, the pair is slowly moving into the power of bearish belief– however if we consider the timeframes above the daily one, then the EUR/USD remains in a wide variety flat, in between 1.1460 and 1.1620.
The occasions of the next couple of days( including today’s) can cause a strong volatility in the set, provoking a relocation beyond the above rate limits. Of all, we are talking about Brexit, whose fate will be chosen today in Brussels. On the eve of the EU summit, political leaders voiced opposing views on the possible outcome of the meeting– some ensured journalists that “the offer was practically approved”, while others advised to get ready for a “tough” Brexit. This polarity of opinions has developed an intrigue that will be solved literally today or tomorrow. If settlements stop working once again, the euro will follow the pound, tumbling down. It is sensible to assume that in an alternative scenario, the EUR/USD set will have the ability to evaluate the mark of 1.1620 once again.
Regardless of the outcome of the EU top, the problem of the Italian budget likewise hangs over the euro. At the start of the week, the head of the European Commission got the draft spending plan of Italy with a deficit of 2.4%. Let me remind you that formally, the Italians did not go beyond the allowable standard in the EU, developed at the level of three percent, but at the exact same time violated their own promises, according to which the deficit was to be at the level of 0.8%. Now ought to be followed by the main response of the European Commission to the actions of Rome.
Probably, Brussels will decline this draft budget, unless the agents of Italy persuade their coworkers at the EU summit of the opposite (which is unlikely). Otherwise, Rome will have to settle the budget and reconcile it with the EU management till completion of November. It is likely that the modification of the document, the Italian authorities will still compromise, as in this case, political duty is largely shifted to the shoulders of Brussels. This is just a presumption that may not be realized.
In any case, the European currency is now under pressure from 2 scenarios– on the one hand Brexit, on the other– Italy. The resolution of among the issues will allow the bulls of the EUR/USD set to get in the 16th figure once again, having evaluated the resistance levels for strength. Otherwise, the set will go back to the bottom of the 14th figure.The material has been supplied by InstaForex Company – www.instaforex.com