Review of trades. Dollar finishes week on positive, but GDP may spoil everything

The dollar continues to strengthen today at the Asian trading session, playing the yesterday’s decision of the US Congress to approve Trump’s budget. Now the president has a real opportunity to carry out the planned reform, which should ease the tax burden on corporations. It’s not surprising that Wall Street indexes reacted with growth, and Asian markets partially picked up this optimistic mood. Oil prices are slightly adjusted after yesterday’s dizzying growth.

Requiem for Aussie
Australia rarely frightens markets with political squabbles, but today is just such a case. The country’s Supreme Court ruled that members of parliament can not have dual citizenship. Thus, four senators and a member of the lower house of parliament Barnaby Joyce, who holds the post of deputy prime minister of Australia, were deprived of their seats, which means that the ruling liberal-national coalition lost its absolute majority in the House of Representatives. Senators will be appointed to the seats of other deputies and the number of relevant parties, but for the place of Joyce it will be possible to compete in the December 2 elections, and not the fact that it will get to the “Nationalists”. The producer price index, published today by the Australian Bureau of Statistics, was worse than expected, indicating a reduction in inflationary pressures. This is another argument for the RBA, so as not to rush to raise rates (although it is not necessary to convince him of this, he is not going to toughen the policy in the foreseeable future). Macrostatistics could potentially increase pressure on the Aussie, but the main catalyst for the fall of the currency today in the Asian session was still political news. This means that the currency can play a part of the losses, when the first passions are settled.

From a technical point of view, yesterday’s Aussie / dollar decline below 0.7700-0.7680 support gives a clear downward signal for the medium term, and today’s close below 0.7640 / 30 will confirm the readiness of bears to drive the Aussie to at least 0.7400. The pair steadily loses positions for the sixth consecutive session, while in the course of the week it lost 2.65% – this is the largest weekly drop since November 2016.

Pound: Will there be no rise?
The pound rose so vigorously on Wednesday when the GDP report for the third quarter came out, and so desperately fell on all fronts on Thursday, in the comments of the Bank of England’s Deputy Chairman Sir John Cunliffe, who said that the forecasts for the UK economy now do not justify an increase rates. The unclear consequences of Brexit and the general unsatisfactory state of the economy, according to the official, can be a sufficient reason to postpone the tightening of monetary policy. The market, which almost completely pawned the price hike in the November meeting, did not like these words at all, as a result, the pound yesterday fell by 100 points and continued to decline today in Asia. The growing difference in profitability between the state. bonds of the United States and Great Britain intensifies the pressure on the British currency paired with the dollar and restrains its growth paired with the euro.

From a technical point of view, local support in the pound / dollar pair is at the level of 1.3130, but it is followed by an even more significant area of ​​1.3100-1.3088 (intraday low on October 20). Most likely, it will stop the pressure of bears to partially adjust losses at the end of the week, provided that the report on GDP published in the US today does not provoke a massive strengthening of the dollar across the entire spectrum of the market. Daytime – and even more weekly – closing below the designated area will greatly worsen the short-term technical picture and may cause a drop to 1.3000 and 1.2960.

Draghi shot bulls in euros from his bazooka
Excessive market expectations, as always, ended in disappointment. Mario Draghi yesterday announced a reduction in the volume of monthly purchases of assets to 30 billion euros and the extension of the program for another nine months. All in accordance with expectations, but, as usual, the most interesting lies in the details. The central bank has ensured maximum room for maneuver, said that it can prolong or increase incentives, if circumstances so require. In general, the euro collapsed as it fell, undermining the important support 1.17. The decision of the US Congress to approve the budget proposed by Trump provoked the strengthening of the dollar across the entire spectrum of the market, accelerating the development of the downward dynamics in the pair. Today, two events can affect the fate of the euro: the speech of the ECB Senior Economist Peter Prat in Frankfurt and a report on GDP in the US for the third quarter. Given yesterday’s large-scale movement, it can be assumed that investors will look for reasons for fixing profits at the end of the week. This means that the euro has a chance to win back some of the losses.
Today, since morning, the euro / dollar has fallen in price by 0.14% and tested the minimum of the Asian session in the area of ​​1.1624. Weekly closing below 1.1630 will serve as a clear bearish signal, indicating a further drop with the nearest target at 1.1460. To neutralize the negative, the pair needs to rise above at least 1.1660 / 70, or better still, return to the area above 1.17, however in the short term these goals look unattainable.

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