15.11.201909:55 Forex Analysis & Reviews: The dollar has a slight advantage against EUR and GBP on Friday

Markets are slightly rising after comments the appearance of the review that the US and China are approaching the conclusion of a trade agreement, but there is no clear optimism. Meanwhile, US household debt rose to a record $ 14 trillion. The monthly budget report showed a slightly larger than expected deficit growth in October ($ 134.5 billion, or up to 4.7% of GDP). As long as Trump's tax reform does not produce any positive results, spending is growing faster than revenue and there is no reason to expect changes in the near future.

On Thursday, FOMC members confirmed the dependence of their subsequent actions on incoming data. Bullard emphasized uncertainty with the US-China trade agreement, Williams said that one should not expect much from the first phase of the agreement. Powell reiterated that the economy is growing steadily, which is generally confirmed so far - yesterday's data on the number of applications for unemployment benefits in the United States were weaker than expected, while forecasts for today's retail sales reports are moderately optimistic. At the same time, a slowdown in industrial production will sooner or later drag the services sector along. The October report which will also be published today, could lead to increased volatility.

EUR/USD

Germany managed to avoid a technical recession in Q3, as GDP data showed that growth was 0.1%. GDP growth is expected to accelerate slightly in the 4th quarter as manufacturing orders resumed growth. The euro reacted aggressively to the publication, but then returned to the range amid US-China risks and comments from the ECB, which indicates that the Central Bank has not exhausted its capabilities and can provide more incentives if necessary.

At the same time, the ECB resumed the asset buyback program in November with a monthly volume of EUR 20 billion, purchases will continue "as long as necessary." However, the exact composition of new purchases is unknown, and therefore, the effect on the euro may vary.

It is expected that the ECB will increase purchases to 40 billion per month by March. In addition, significant volumes of the ECB will be introduced into the eurozone economy, continuing reinvestment. In recent years, the ECB has bought an average of about 200 billion euros a year in bonds; Nordea Bank believes that next year the ECB will be able to buy up to 75% of all bonds placed on the primary market. Such a policy will lead to an increase in demand for bonds, which, in turn, will contribute to a drop in their yields.

In other words, the actions of the ECB in the coming year will objectively contribute to lower rates, that is, in conjunction with the dollar, the ECB will purposefully reduce its value. If the Fed, in turn, does not take steps aimed at weakening the dollar, then this alignment will objectively help reduce the EURUSD pair in the long term.

In the short term, the EUR/USD trend remains bearish. A decline in support of 1.1005 indicates a rather strong momentum and a pullback to 1.1030 makes it possible to open short positions in order to re-test 1.1005 and further 1.0880.

GBP/USD

The pound continues to ignore the deterioration of macroeconomic indicators as well as the expectations of the December 12 election results. On the other hand, retail sales decreased in October, year-on-year. The indicator remained at the level of September + 3.1%, while growth of 3.7% was expected. A weak report on inflation was released a day earlier, which showed a slowdown in inflation to its lowest level in 3 years.

Since mid-August, when Brexit tensions began to subside, the pound rose 7% against the dollar. Thus, the slowdown in inflation will put strong pressure on the pound.

Technically, the pound remains neutral in the short term, the channel 1.2820 - 1.2890 is quite narrow for the pound. The resistance is 1.2900 stable, with growth at this level, you can enter sell while a move below 1.28 will provide an opportunity to sell with a target of 1.2769.