Let me take the liberty to share with you some thoughts of a medium-term nature. At the same time, it would be interesting to get acquainted with possible alternative points of view.
The dynamics of world currency markets in recent days has gradually clarified the situation with the answer to the main question of the current moment: is the multi-month period of the strengthening US dollar over? I tend to respond positively to this question. This conclusion is based on the following set of factors:
1. Despite the further tightening of the monetary policy of the Fed, which will continue to gradually increase interest rates over the next 2 years, the end of the complete curtailment of the quantitative easing program conducted by the European Central Bank is approaching. A number of European regulators, after a long period of loose monetary policy, are also gradually inclined to move to the next stage, characterized by an increase in interest rates. First of all, we can note the Bank of England, whose head Mark Carney, announced the possibility of raising interest rates, despite the outcome of the Brexit talks.
2. It is predicted the conclusion of the Agreement on the withdrawal of the UK from the EU. The end of this story should come within the next 2-3 weeks. It is planned that the final vote on Brexit will be held on November 27 in the House of Commons of the British Parliament.
3. The topic of trade contradictions between Beijing and Washington. From my point of view, after several months of pressure on the Chinese side, US President Donald Trump can change tactics. The first manifestation of the new line of realization may be a meeting of the two leaders at the Summit 20 in Argentina at the end of this month, where will be tried to come to some preliminary agreement.
4. Italy budget problems. The growing controversy between Rome and Brussels on the budget issue will lead to a gradual change in the European standards in the formation of national budgets. The politicians of the previous period, whose outstanding representative is German Chancellor Angela Merkel, are gradually replaced by new leaders, for whom the problems of national economies are a priority.
5. From a technical point of view on the daily chart USD Index formed a divergence between the maximum prices of mid-August, late October and the corresponding values of the RSI and MACD indicators, which indicates a medium-term decline in the indicator.
6. After EUR/USD and GBP/USD currency pairs approach the region of the minimum prices of the current year, on the daily timeframe there is a convergence between local price minima and RSI and MACD values, which allows to suggest the beginning of the medium-term positive dynamics of quotes.
7. In the USD/CHF pair, on the D1 time frame, as the quotes approached the parity mark, a correction signal was formed - a divergence between the price peaks of May 9-10, October 31 and November 1 and MACD values, which indicates the beginning of the negative dynamics of the pair.
Thus, the combination of these circumstances leads to the conclusion about the end of the period of strengthening of the US dollar, which began in mid-April this year. In most cases, the market lives with expectations and the fact that the US economy is currently at the peak of their economic cycle implies that in the future the markets will observe a gradual slowdown of the economy, which will affect the exchange rate of the dollar in a negative way.
Today, the market participants will expect the outcome of the next meeting of the Federal Reserve System. Surprises are hardly to happen. The regulator will confirm its adherence to a tight monetary policy and will approve the markets in readiness to once again raise the interest rate at its December meeting. The press conference of Fed Chairman Jerome Powell is not planned for today. Therefore, the impact of this event on the dynamics of the currency markets can only be short-dated.
EUR/USD
According to the results of yesterday's trading, with the background of the mid-term elections to the US Congress, the EUR/USD pair worked out the divergence between the price highs and the corresponding MACD indicator values, dropping towards the upper limit of the medium-term channel near the 1.1420 mark, by the end of the day.
Today, before the announcement of the outcome of the Fed meeting, the pair is stabilizing in the area of the achieved price values. The fact that the quotes stopped at the specified border suggests the resumption of positive price dynamics in order to return the quotes to the maximum values of yesterday. At the same time, as noted in previous overviews, the medium-term goal of increasing quotes is the area of 1.1700-1.1710.
Support and resistance zones are today located in areas 1.1415-1.1425 and 1.1485-1.1495, respectively.
GBP/USD
Today, in the first half of trading, is predicted the gradual decline of GBP/USD quotes to the support located in the area of 1.3030-1.3055. Negative price dynamics will be a signal between the highs of prices and the values of the MACD indicator (highlighted in the chart with a yellow marker). At the same time, in the second half of the day, a gradual stabilization of prices and the subsequent resumption of growth in quotations are expected with the aim of updating the highs of yesterday. Definitely, that the pair’s dynamics is adversely affected by the Brexit issue.
However, as noted above, I am on the point of view that in the coming weeks an Agreement on the withdrawal of Great Britain from the EU will be reached. In this case, the British currency will receive a powerful growth impulse.
It should be borne in mind that local statistics on UK GDP for the 3rd quarter will have a local impact on the dynamics of quotations. However, the impact of this fact will be short-dated. The presence of convergence in the daily timeframe allows us to predict a further increase in quotations. At the same time, the nearest medium-term growth target is 1.3300.
The support zone today is in the 1.3030-1.3055 area (green oval).
The resistance zone is in the range of 1.3165-1.3180 (red oval).
USD/JPY
The technical picture of the pair USD/JPY on the basis of trading on Wednesday has not changed. On the USD/JPY H4 chart, a divergence is formed between the local maximums of quotes and the corresponding values of the RSI and MACD indicators. Today, for the prices are predicted to decline in order to reach the support zone around the 113.00 mark. At the same time, most of the day the pair will make minor fluctuations in anticipation of the outcome from the Fed meeting.
The support zone today is the range 112.95-113.10 (green oval).
The resistance zone is located at 113.65-113.80 (red oval).
USD/CHF
Today, in the first half of the day, the pair USD/CHF has stabilized just above the parity mark. Yesterday, there were significant fluctuations in the market caused by the outcome of the elections to the US Congress. A gradual decrease in quotations is predicted in order to work out a signal of a corrective nature — a divergence between price maxima and the corresponding values of the MACD indicator. The goal of negative dynamics is the area of 200-period MA, located near the mark of 0.9940.
The strengthening of the Swiss franc can contribute to the statistics on the labor market published today. The unemployment rate, considering seasonal changes at the end of October, remained at 2.5%, which coincided with market expectations and is the minimum value of the indicator over the past few years.
The support zone is present in the area of 0.9930-0.9960 (green oval).
Resistance is still the range 1.0030-1.0050 (red oval).
The weakening of the US dollar, which was observed at yesterday's trading, led the USD/CAD quotes by the middle of the day to the level of 1.3055. After a short stabilization, prices began to rise. This can be explained by the formation of convergence between the price minima and the values of the RSI and MACD indicators (highlighted on the chart with a yellow marker). Today is predicted the prevailing lateral dynamics of quotations in the immediate vicinity of the 200-period MA on the H1 time frame, located near the 1.3100 mark.
The situation may be broken closer to the end of the day, when the results of the Fed meeting will be known. At the same time, on the H4 time frame, there is a divergence between local maximums of quotes and MACD values, which suggests negative dynamics with the aim of reducing to the upper limit of the medium-term channel located near the lowest prices of yesterday, near the 1.3050 mark.
The support is around 1.3080-1.3090 (green oval).
Gold
As a result of the decline in gold quotations, prices reached the support zone located in the area of 1223.00-1224.00. At the same time, from a technical point of view, a convergence has formed on the chart between the price minima and the corresponding values of the MACD indicator.
This circumstance allows to assume about the probability of growth movement, which purpose is the maximum values recorded at the trade on Wednesday around 1233.00-1235.00.
The support zone is located in the area of 1223.00-1224.00 (green oval).
Resistance is in the range of 1232.50-1234.00 (red oval).
