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19 November Forex daily review

Sergiy Zlyvko
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On Tuesday, the fluctuations of the currency pairs in the market were impulsive. In the morning, the U.S. dollar strengthened against the single currency and the British pound, but in the second half of the day the dollar fell.

From the updated maximum 1.3540, EURUSD back to around 1.3480. The euro increased to 1.3540 by the decision of the People’s Bank of China to stop its regular interventions in the foreign exchange market. From the level of 1.3540 traders began to partially close long positions in the euro. The fall accelerated after the application of a member of the Executive Board of the ECB Peter Praet, ZEW report release, as well as the revision of the forecasts to the downside of German economy growth and the euro zone in 2014. A similar pattern was observed in GBPUSD pair. GBPUSD rate against dollar’s corrective rally updated intra-day low of 1.6060.

In his speech, Praet reminded market participants about fragile economy and low inflation in the euro area. The index of business sentiment and the euro zone index of current economic conditions in Germany were worse than expected. The organization has reduced the OECD forecast for Eurozone GDP from 1.1% to 1.0%. German GDP was reduced from 1.9% to 1.7%. French GDP increased from 0.8% to 1.0%. OECD experts recommend the ECB to implement quantitative easing program.

Early in the morning Head of the U.S. Federal Reserve Ben Bernanke had a performance. On its comments the euro/dollar updated new high. Bernanke reiterated that the asset purchase program could be started to collapse, when employment growth is stabilizing, inflation will show signs of growth in the medium term. It looks like that as long as lawmakers do not make the budget and not raise the debt ceiling, we think they won’t touch QE3.

Charles Evans surprised the market by his statements. People are waiting for folding incentive program and he did not hesitate to declare the possible expansion of QE3 by 50% next year. It remains to wait for the publication of the Federal Reserve minutes and see the reaction of the market.

Before the release of minutes we consider dollar’s correction. Short-term technical picture remains negative attitude to the dollar, so at 19:00 GMT the dollar could follow another blow. The trend is bearish on H1, so the main scenario executed by dollar’s failing. If the dollar strikes a trend line, we will change the view on the dollar in the short term.

EURGBP cross rate closed positive the second day in a row and in Asia continues to make new highs. Strengthening of the euro against the pound is reflected in the major pair GBPUSD. The last two days pound is trading sideways. In the European session amid U.S. dollar falling, GBPUSD rate has returned to a level of 1.6130. We suppose that on European trading pound retrace to 1.6080 from which begin to rise again. Break of 1.6075 will cancel the main scenario.

After an upgrade of the maximum on the news from China, AUDUSD until the close of the day was trading in a sideways trend. Trend line passes through 0.9390. From this area, we expect a rise by the main scenario. Line’s break cancels all scenarios.

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