Trading signals

Once again new trading week brings new background. Americans enjoy an extra day off, while markets focus on economic data from China. Although Chinese data confirmed a slowdown in the economy (it is not important for us now if it is the influence of the global economic downturn, or trade issue with the US), this did not come as a surprise to the markets, nor did it cause additional demand for risky assets. It seems that the markets remain optimistic after the last Friday market close, in addition the relatively “thin” market makes it hard to respond to the data fully. FOREX market starts the week within Friday levels. Traders focus on US dollar. Last week, US currency index showed impressive results. Dollar index gained from the level of 95.00 points to the level of 96.00. Once again, we note that this area 95.75-96 is a strong resistance area, but more details on this below. Technically, the dollar is overbought somewhat, but we will find out how events will develop this week.

In general, FOREX market hasn’t been active so much this week. On Friday, most major currencies are trade in tight ranges and what is most interesting point, within one percent of the weekly open level. We recall that the first 2019 full-active trading week was much more intense and volatile. It seems that the markets took a breather to reflect on the current situation, or a local balance of power has emerged amid information vacuum at the end of the trading week. All of stated above applies to all FX instruments, with the exception of the British pound, that presented the expected but no less interesting surprise.

We enter the second half of the current week - events in the markets are developing somewhat quietly. The biggest event this week is left behind -Brexit vote in the British Parliament, and Theresa May is now working on her Plan B, which she outlined on Monday. The inflation rates in the Eurozone and the Philadelphia FED will be in market focus in the Thursday calendar. US dollar continues the moderate growth, but USD has displayed signs of overbought conditions, futures for US indices in the red zone in Asian trading.  

After the loud Tresa May defeat on the Brexit vote in parliament, which is the worst defeat for the current UK government, there are many other uncertainties in the market, and these uncertainties have more fundamental and  more extensive nature. The slowdown in economic growth in Germany, which means in Europe, the actual decline in exports and imports in China, all this creates risks for the American economy — in this sense, today's retail sales data will be in general market focus.

GB voting for Theresa Mae’s Brexit deal in the UK’s House of Commons takes center stage on Tuesday’s trading session, although voting starts late in London time the event will affect the entire trading session. On the eve of the vote, it is expected that the May deal will be rejected. Yet, this did not prevent the pound from gaining to the highest level since mid-November on technical factors and GBP shorts liquidation. This is alarming, but we will closely monitor developments as we anticipate high volatility.

We are entering a new trading week, this week Brexit will again be in the spotlight, focusing on an important vote in parliament, scheduled for Tuesday, at which the government will either approve or reject the Theresa May deal. The dollar remains under pressure; however, there are signs of oversold USD market. We will see how the trading week will develop

At the end of the week, we summarize the first full five trading days of the year. Throughout the week, the market sold the dollar in all directions. The main driving force behind the price action was a reduction in hike- rate forecast by the Fed, which seems consistent with the will of the market, given higher risks  for global growth in 2019 and global economic slowdown. Today, the focus is upon the general data of the week, reports on US inflation (CPI index).

Finally, there are some movement in the foreign exchange market, some beautiful action in term of technical analysis movement- euro breaks through an important resistance level $ 1.1500. We expected this development at the beginning of the week, but we believe that this is just the beginning, as it sets the stage for the start of a longer and more extensive USD dollar sale-off. Fundamentally, all this coincides with new FOMC position, which reconsiders its plans and is now in no hurry to hike the rates.  

We are back to normal after-holiday market volumes. However in the middle of the week investors are still focusing on the results of trade negotiations between US and China, which were extended to Wednesday, a positive sign for the markets. On Tuesday, the volatile dollar trading continued - however, all attempts of corrective growth were cancelled. Today, the focus of the players is upon so-called Fed minutes. The day promises to be interesting.

We are back to the full after-holiday trade- market volumes are returning to normal levels. Investors will want to know what will happen in the last round of trade negotiations between the US and China, and this factor is still in the spotlight of the markets, as well as what Theresa May intends to take to avoid defeat in parliament next week. On Monday, some tactical oversold of the dollar was spoted, but on Tuesday in Asia we see a slowdown of this local pullback.