26.09.201708:10 Forex Analysis & Reviews: The political spiral unwinds

EUR / USD, GBP / USD

The trading week for investors began with a strong statement by the DPRK saying that the US "declared war" on them because of its external aggressive behavior. In response, North Korea is able to take any action, such as shooting down American planes flying alongside the DPRK in a neutral territory. The news came in even stronger than the expected victory of Angela Merkel's party in Germany, losing the success of the right-winged party, "Alternative for Germany" (13%), which was first held in parliament. Another news is from the side of the dollar, which is the independence referendum held in the Iraqi, the autonomous region of Kurdistan. According to preliminary data, more than 90% of voters voted for independence. Most Arab countries, Baghdad officials, and even the UN Security Council were against this hasty referendum. While Israel also supported the referendum. Obviously, Kurdish settlements of Iran, Syria, and Turkey aims to enter Kurdistan. Greater tension is further anticipated, especially in Ankara, which will increase demand for dollars. The sentiment index in German business circles Ifo declined from 115.9 to 115.2 against expectations of growth to 116.0, this even more strongly pressed on the European currency. As of yesterday, the head of the Federal Reserve Bank of New York, W. Dudley, spoke in favor of maintaining the tightening plan, provided that the inflation rate remains unchanged. On Monday, the euro lost 108 points, followed by the British pound, with no support, declined by 40 points.

Today, the investors' attention is focused on the United States. In the evening (5:45 London time), the head of the Federal Reserve, Janet Yellen, speaks on "Inflation, uncertainty and monetary policy". Earlier at 3:00 PM London time, the data on sales of new housing in August will be released, with a forecast of 585 thousand against 571 thousand in July. The S&P / Case-Shiller home price index in the 20 largest US cities for July could rise to 5.8% YoY from 5.7% YoY in the previous month. The consumer confidence index would likely decline according to the Conference Board for September, showing a forecast of 119.9 against 122.9 earlier.

We are expecting for the euro in the range 1.1745 / 75, and the pound sterling in the range of 1.3380-1.3400.

USD / JPY

Despite the large-scale approach of the dollar, the dollar-yen pair failed to show growth due to the political basis of this offensive, together with the decline yesterday in the US stock market, as the S & P500 index lost 0.22%, while the technological Nasdaq is down to -0.88%. Today, the Nikkei 225 declined to 0.32%. The economic indicators of Japan came out moderately positive, showing an increased on business activity in the manufacturing sector from 52.2 to 52.6 for this month, the index of leading economic indicators increased from 105.0 to 105.2, and the price indices for corporate services increased from 0.6 % YoY to 0.8% YoY.

Tomorrow will be released the data on orders for durable goods in the US for August, the forecast for the base index is 0.6%. We are looking forward to the growth of the US stock market and the associated growth of the Japanese yen on Wednesday. In the current situation, it is likely that the initial price will decline to 111.00, where investors can better prepare for purchases. The goal is to return to 112.75.