Fundamental analytics

USD dollar is trading volatile as dollar index tests 95.20 points

In the FOREX market, the situation continues to evolve in volatile way. USD dollar weakness  intensified at the beginning of this week, when, after strong Friday statistics on the US labor market, on the one hand, interest in risk increased, on the other hand, Powell’s Friday comments lowered investor confidence that FOMC is ready to continue to hike the rate in 2019. On this background, USD dollar was trading under heavy pressure on Monday, when the decline was replaced by a small technical pullback on Tuesday. Tuesday’s trading session is somewhat volatile one and is marked with increased volatility. Shortly ahead of Wall-Street start, the decline in the US currency resumed. The dollar index fell to a level of 95.45 points.

The index traded these levels last time in October 2018. These are local minimums for 4 months. This week, the focus of investors is upon another strategic driver, trade negotiations between the United States and China, which resumed on Monday. There is a hope that these negotiations will be successful and we can expect certain agreements that will prevent the further development of a trade war. These are essentially positive expectations, is a negative factor for USD dollar, although not yet confirmed, but already having an impact on the foreign exchange market.

In Europe, information background is somewhat empty. Today there are no important statistical publications in European economic calendar, so the dynamics of the EURUSD pair depends on the movement of the dollar. An interesting situation in this market has emerged. The pair approached the significant level 1.1485 / 1.1500, this is the December highs and the upper limit of the medium-term range 1.1315-1.1495. The question that worries the whole market now is whether the pair will be able to get out of the range and gain a foothold in its upper end. We recall that EUR / USD market has been in this side range for the past three months.

GBP / USD maintains a positive trend, due to the weakening of the dollar. However, market fails to develop a directional movement.

This week, the British Parliament has resumed debates on the Brexit bill. The final vote on media reports is due on January 15. During this time, the British government intends to achieve certain concessions from the EU, but so far there is no new information on reaching additional agreements and agreements between the UK and the EU.

The risks of implementing the “tough” Brexit scenario remain very high, and British pound sterling is limited in its recovery opportunities despite the global weakening of the dollar. On this mixed fundamental background, GBP / USD pair has not overcome the level of 1.2780 for several weeks. This is a strong technical level, the overcoming of which will open the way for the market up to 1.2930.

The third most popular pair of the FX market -USD / JPY market continues its corrective growth despite the global weakening of the dollar. On Monday, among the G7 currencies, only the Japanese yen closed trading day firm against USD dollar. The current trend in the market is primarily due to increased investor demand for risky assets. Risk readiness in the market is always accompanied by Japanese yen decline. Especially considering the strategic oversold of this market.

On the chart there is developing bullish correction. After a brief consolidation, buyers managed to break through resistance at 108.65 and now there are good opportunities to continue the current rolling movement with the goal at 109.50, from where the downward movement can resume.