21.09.201811:08 Forex Analysis & Reviews: The growth or decline of the dollar will depend on the signals of the Fed

The local weakening of the US currency against all major currencies continues against the backdrop of the continuing hopes that the trade war between the US and China will not reach extreme boiling points.

Recall that at the beginning of the week, the States decided not to increase trade duties on Chinese imports by $ 25 billion by 25% until the new year 2019, and to raise only 10%. This caused a positive reaction of the markets, which was reflected in the demand for risky assets. First of all, shares of companies, commodity, and raw materials were bought. But the US dollar, as expected, was under considerable pressure.

And here, in our opinion, there are two reasons. The first is a decrease in the attractiveness of the dollar as a safe haven on the wave of lowering the tension in the trade relations between Beijing and Washington. A similar picture is observed in the pair US dollar / Japanese yen, where the latter declines relative to the dollar. The second reason is most likely based on the partial fixation of the US dollar's profit before the Fed's monetary policy meeting next week, which is expected to raise the key interest rate for the Federal Funds by 0.25% to 2.25%. Now this probability is estimated at 92.0%.

It is likely that the outcome of the meeting of the regulator will not only raise the interest rate, but there may also be a signal that it should be raised at the end of the year by another 0.25%, to 2.50%. If this signal is followed, and such a probability is extremely high, then the dollar can receive appreciable support and turn up in the currency markets.

Observing its current dynamics, it can be argued that the decline is very restrained both because of the approach of the Fed on Wednesday, on the one hand, and on the other, the understanding by investors that the problems of the trade war between the states and China have not been resolved, second plan. And at any moment, they can again remind themselves that they will necessarily become the basis for the resumption of the growth of the US currency.

Forecast of the day:

The currency pair AUD / USD is trading below the level of 0.7300, having reached the resistance line of the medium-term downtrend. If this level stands, there is a probability of a local turn of the pair down to 0.7235.

The currency pair USD / CHF is trading below the level of 0.9600. Franc remains a hostage of geopolitical tensions in the world, as well as turbulent events surrounding the Beijing-Washington trade war. Additional support can be obtained if a general agreement between the EU and Britain on Brexit is not reached. In this case, there is a risk of continued falling prices. Today, if the pair does not rise above 0.9600, it may fall to 0.9535.