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EUR/USD Technical Analysis


The pair declines.

Since yesterday's trading session we have seen that the pair has fallen below the 1.15 mark, but has not yet been able to gain a foothold. Despite the controversial data released yesterday in the US, the US dollar strengthened. The dollar index rose above the 95.00 mark and showed the largest increase in the current month.

An EU summit will take place today, but the current negotiations on Brexit will most likely affect the British pound exchange rate more than the single currency. Perhaps we will observe an increase in volatility in this period.

From the US today we expect the Purchasing Managers Index from the Federal Reserve Bank of Philadelphia, as well as a number of macroeconomic indicators, including data on the labor market.

At the moment, technical indicators clearly point to a sell. We also expect the pair to test annual lows again and continue the downward movement.

We advise you to look for points to enter short positions. Consider as your goals the marks of 1.1450 and 1.14.

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The EU Summit in a Nutshell


A report and an evaluation of the most important developments from this week's summit of EU leaders.

The leaders of Europe gathered in Brussels this week to discuss the most important topics of the day: Brexit, security measures, migration, and climate change. Here are the highlights from this major event.

To begin with, we need to talk about the Brexit negotiations, as this has been without a doubt the leading topic of the summit and the one analysts were looking forward to the most. The previous meeting between UK Prime Minister Theresa May and representatives from the European Union, where May presented her plan for the United Kingdom’s exit from the bloc, did not turn out very well. As a result, analysts following the issue have speculated that we are more likely to get a hard Brexit than not. This is why at the summit many people were interested to see how things would go for Britain.

However, it appears that the issue of the Irish border continues to plague Brexit talks. Naturally, the republic of Ireland, as a member of the European Union, will require a border with Northern Ireland, which, as a part of the United Kingdom, will leave the bloc. At the same time, the Irish people and the British government would like to see no policed border between the two, as the situation is currently. This seems to be one of the core issues the EU and the UK cannot agree on. Nevertheless, May spoke about the possibility to extend the transition period for the United Kingdom, suggesting that the European Union is prepared to be patient and flexible in that regard. Yet Donald Tusk suggested that this “courtesy” would not be free and would have to be financially compensated by the United Kingdom. Theresa May’s plan to extend the transition period (which normally ends in December 2020) was met with criticism from her government, who argued that the extra months would not bring much of a resolution beyond what can be achieved in the already allotted time, but would be quite expensive, i.e. the costs outweigh the benefits of such an extension.

The talks are expected to continue next month if there is no significant progress by the end of October. However, Michel Barnier, who is the chief EU negotiator in the Brexit talks, has stated that November is already too late, since even if a deal is reached between the bloc and the United Kingdom, it would take months to ratify all of the legislation necessary, so the March 29 deadline will likely be missed.

Aside from Brexit, European leaders also discussed improving migration policies, in particular handling refugees. Though refugee numbers have declined by 90% from what they were in 2015, many European countries still worry over them. It was suggested that all EU members, not just those connected to the Middle East and North Africa by sea, should participate in solving the problem. Other than mandatory refugee quotas per country, it was suggested that some states could make financial contributions instead.

In terms of security, EU countries are moving towards better legislation against cyber attacks and implementing more uniform measures against the perpetrators. These include blocking finances and denying travel access, even between member states.

Lastly, EU leaders compared notes in preparation for a difficult fight against climate change that is likely to happen with the United States at an upcoming UN meeting in December in Poland. Donald Trump pulled out from the Paris Accord earlier, but countries are determined to try their best to limit the damage to the environment and are hoping to convince the US President to sign a new deal, even if it is more or less equivalent to the Paris one he abandoned.
 
EUR/USD Technical Analysis

The pair found a level of support.

During yesterday's trading session the dollar index gained over 40 points and the reserve currency strengthened against the basket of major currencies. Against this background, we observed a decrease in the price of this pair.

On our chart the support level at 1.1440 was again worked out and we observe a correction from it. The technical indicator ADX indicates that the downward movement will continue. The MACD is in the negative zone and also indicates a sale.

Currently we do not expect the release of any significant news that can considerably change the trend. We believe that the price will continue to maintain the downward trend and will again go to the mark of 1.1440 and in case of its overcoming will go to the mark of 1.14. Therefore, we advise you to look for points to enter short positions and consider the above levels as your goals.

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Technical Analysis



EUR/USD. We see that the price was able to overcome the level of 1.1450 and reached the level of 1.1405.

GBP/USD. We see that the price went below the mark of 1.2960 and is now testing the mark of 1.2930.

AUD/USD. The pair is below the MA21 and returned to the lower Bollinger band. The Stochastic indicates a sell, with a possible progress to 0.7045.

USD/CAD. The pair is still below the 1.3120 mark, but found support near the MA21. The technical indicators are multidirectional.

 
USD/JPY Technical Analysis & Daily Chart


We can try selling the pair today.

Today we would take a look at the USD/JPY currency pair. The price has retreated from the highs registered at the beginning of October and is holding steady within a channel between 111.64 and 112.88.

The American dollar has shaken off any of the slight weakness experienced days ago and has strengthened once again. This is based on positive fundamental reports about the U.S. economy, as well as a confirmation from the most recent Federal Reserve publications that the central bank remains committed to their hawkish monetary policy. Despite President Trump’s criticism of interest rate hikes, the Fed will increase rates once again in December and are planning around 3 hikes in 2019, in accordance with market needs. Today we expect important data on trade in the US for September, which will likely affect the American dollar.

Meanwhile, the Japanese yen remains under the influence of other currencies. The Bank of Japan is continuing with their quantitative easing scheme which is aimed at boosting the economy and moving it further away from its state of near-recession. Because of this, the yen lacks incentives for growth.

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In terms of the daily chart today we have a pivot point for the USD/JPY pair located at 112.24, with the pair currently trading slightly above it. The daily resistance levels lie at 112.50 and 113.00. In case the yen strengthens, look to the supports at 111.74 and 111.48. The indicators of technical analysis are showing us mixed signals, but lean towards a sell recommendation today.
 
A Look at Europe

The European economy is not growing as much this year as it did in 2017, so what's in store for the future?

In the absence of any urgent developments on the financial markets this week, we decided it is time to take a look at something that’s gone more or less under the radar lately: the European economy. Despite doing unbelievably well last year, so far 2018 has been nothing if not underwhelming for the eurozone, especially considering the hands-off approach of the European Central Bank and the ongoing issues of Brexit, plus the looming danger of possible trade tariffs from the United States.

There have already been several indications that growth in Europe is slowing down. October’s growth alone has been less compared to the same month in 2016 and 2017. The European Central Bank also revised its own forecasts and expects economic growth of 2% in 2018 (versus 2.5% in 2017). A likely culprit for the slower growth are the trade tariffs started by US President Donald Trump which have upset the global trade balance, forcing many countries to look for different partners than usual in order to avoid the extra fees. Despite this slower growth, however, ECB President Mario Draghi reassured investors that the central bank will stick to its plan to end stimulus in December.

In terms of the global trade conflict, we have to admit that the European Union has not really been the primary target of the United States. Thanks to a meeting with Jean-Claude Juncker, Donald Trump agreed not to add extra fees to European automobile exports to the United States, which was perhaps the biggest threat for the EU. Nevertheless, the bloc has been hit with fees on steel and aluminum exports (the very first tariffs that Trump announced, which were implemented against the largest list of countries). Plus, the trade issue between the US and China is also affecting the eurozone, albeit indirectly. China and the States are the two biggest economies in the world and naturally the EU does tons of business with both of them. Hard-hit by American tariffs, China is itself experiencing some slowdown in economic growth, and this naturally hurts its trading partners, including the European Union.

In fact, earlier this week Germany had to agree that the European Union will start importing natural gas from the United States instead of Russia (even though Russia has been more convenient in no small part due to the fact that there isn’t an ocean separating it from the EU). This was done as a compromise in order to avoid more tariffs places on European goods. Even so, manufacturing in Germany, the strongest economy in the bloc, is slowing. Germany’s massive car industry has not been immune to damage either. Both BMW and Mercedes Benz, the leading German car manufacturers, have reported lower profits recently. All of this can be traced back to the general investment insecurity on the global financial markets which is propelled by the hostilities between the United States and China.

Brexit, too, continues to be a source of instability in Europe. Even though we are very close to the 2-year negotiation deadline between the United Kingdom and the European Union, there have not really been any solid agreements between the two. This is why no one quite knows what would happen after the Kingdom leaves in March, with or without a deal. European companies with offices and factories in the UK are considering temporary halts to their activity there for the first few weeks after the Brexit, while British companies are striving to accumulate as much EU imports as possible before the break up in March. Airlines are also unsure of how to operate flights in and out of the United Kingdom, considering right now they are all bound by European legislation, which might not apply after Brexit.
To add to all of that, Italy is also causing problems for the EU lately. The Italian government (which isn’t particularly fond of the bloc in general) has proposed a budget which will see spending and deficit increase beyond the legally binding boundaries set by the European Union. Unless Italy complies with EU regulations, the bloc will have no choice but fine Italy, which doesn’t have the healthiest economic track record to begin with.

Due to the combination of all of these factors, we are not likely to see any upward momentum in the eurozone in the near future. Perhaps if the troubles with Italy and the United Kingdom are resolved in the next couple of months, 2019 will offer more promise for investors, though the trade war issue will remain.
 
EUR/USD Technical Analysis

The pair is trading at the bottom.

Today we are waiting for the publication of the consumer confidence index in the U.S., which can significantly increase market volatility. Currently the dollar index is at 12-week highs.

We can see that the price remains below the MA (21) and continues to remain in the lower Bollinger band. Furthermore, the price has been unable to overcome the mark of 1.14 and is trading below this level. We believe that the price will continue this downward movement. Technical indicators confirm the entry into short positions.

Therefore, we advise you to look for points to enter short positions and consider the marks near the levels of 1.1310 and 1.1280 as your targets.

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CAD/JPY: Fundamental Review & Forecast


The JPY being a safe asset has a perspective in the long term but now the deals on the trend seem the most effective.

The rates continue in the frames of the upward trend started in March 2018. During this time, the Canadian dollar received support due to the growth of oil prices, a balanced monetary policy and a good economic situation. A distinctive feature of this trend is its stability and optimal volatility, which couldn't be said about the CAD/JPY rates before. At the same time, the Canadian dollar, being a commodity currency, was least affected by the trade conflict between the US and China. The trade conflict with Canada and the US was recently resolved with the signing of a new agreement to replace NAFTA.

The situation changed somewhat this month: oil was rapidly losing its value and demand for risky assets began to decline amid decreasing in the US stock market and investors' fears about the slowdown in the global economy. Therefore, the Japanese yen received some support, saving its status of a ”safe asset " among investors. Nevertheless, the Japanese yen is under considerable pressure due to slowdown in the economy, as well as the Bank of Japan's soft monetary policy and lack of interest in strengthening its currency. The latest macroeconomic reports showed a decline in industrial production by 1.1% in September, against the expected on the market -0.2%; the volume of construction of new homes fell by 1.5% against the expected decline of only 0.5%, and the index of household confidence fell to 43 pips. Although the unemployment rate remains traditionally low and decreased to 2.3% in September, we can see a continuation of the economy's downturn.

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Canada is waiting for new reports. This week will be published data about the GDP and the trade balance, which certainly affects the cost of the CAD. In this situation, the most optimal would be the deals on the trend, which is confirmed by the Stochastic oscillator.
 
GBP/USD Technical Analysis


The pair is turning around.

After the dollar index reached one-year highs approaching the 97.00 mark during yesterday's trading, we are seeing a weakening.

The recently released macroeconomic indicators from the UK showed worse results than expected. However, the chart still shows an upward movement. Today we expect increased volatility in the pair, as today there will be a speech by the Bank of England's head Mark Carney and the publication of the BoE interest rate decision will take place. The interest rate is supposed to remain at the same level of 0.75%. There will also be a number of other reports. The Manufacturing Business Activity index showed a decline to the level of 51.1 instead of the projected 53.00.

However, we believe that the correction for the pair continues to take place and the pair will show growth to the levels of 1.2920 and 1.2960. We advise you to look for points to enter long positions and consider the aforementioned levels as your goals.


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A Deal with China?


Today the markets are optimistic that the US and China might reconcile.

The trade war that US President Donald Trump began this year is still developing and sending harmful ripples through the global economy. Stock markets have been hit particularly hard, as have some commodities, as a result of slowing economic growth. However, this week some of those losses are stabilizing and investors seem optimistic for the first time in months – why is that?

For months now the United States have been trying to pressure China into changing its policies and using trade tariffs for that purpose. Trump’s administration’s logic is the following: unless China complies, we would impose more tariffs; rinse and repeat until the pressure gets too much and China gives in. Somewhat understandably, China has stated before the World Trade Organization that this is bullying and so far has chosen to implement their own reciprocal tariffs in return. Even earlier this week Trump threatened more tariffs, as a testament to how volatile the whole situation is.

Nevertheless, yesterday Trump and Xi Jinping, the President of China, held an important phone conversation that was lauded by both as the beginning of an agreement that would be finalized when the two meet in person at the G20 summit on November 30 in Argentina. Trump was quite positive that the two countries are making progress towards resolving their differences, while the Chinese government was more temperate in their response, but still confirmed that the talk was illuminating. According to preliminary information, the US President’s administration is already working on a draft for a trade agreement that Trump hopes can be signed at the end of the month.

The news has had wide-ranging effects on the financial markets. Stocks in both the United States and East Asia have stabilized today, and so did European indices. The Chinese yuan, which has been weakening for the greater portion of 2018, made a 0.4% recovery.

However, this all seems a bit peculiar considering how harsh Trump’s tone has been against China up to this point. He’s called the government a currency manipulator on several accounts, and he’s hit them with quite substantial tariffs. Moreover, several Chinese tech companies have run into trouble with their American partners, a couple being brought to court over intellectual property issues at this very moment. Furthermore, even if the President’s intentions at making a deal with China are honest, the Chinese government is known for its prudence and slow, careful actions. It is highly unlikely that a deal drafted in under four weeks would be more convincing than over $250 billion worth of tariffs have been. In other words, analysts don’t expect China to agree to change its ways anytime soon.

A much more probable explanation for this week’s surprisingly positive developments is that President Trump is trying to boost his own repute with US citizens as we are nearing an important milestone in his presidency – the midterm elections. Held just a few days from now, on November 6, these elections offer American voters the chance to completely replace all 435 politicians in the House of Representatives, about 30% of the Senate, and many local positions. With low approval ratings and multiple issues in his presidency so far, Trump might find the Republican party losing quite a lot of ground to the Democrats next week, which would then make his own legislation difficult to implement.

In any event, we don’t know much about his trade agreement with China and likely won’t find out more until the G20 summit. Until then, the markets remain volatile and susceptible to all kinds of news.
 
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