15.01.201913:08 Forex Analysis & Reviews: Dollar gives way to the euro

The EUR / USD rate reached 1.1485, having found support at 1.145. "Bulls" on the main currency pair did not manage to scare the weak statistics on the eurozone, rumors about the resumption of the US-EU trade conflict, as well as Trump's statement about the absence of specifics in the Washington and Beijing talks.

Sources in the White House told the Wall Street Journal of their readiness to complete a truce with the European Union, whose goal is to eliminate trade barriers and increase exports of US agricultural, energy and other products to the EU. There are rumors in the market that Donald Trump will immediately switch to Europe, after settling issues with the Middle Kingdom.

Tariffs cause suffering to China, says the president of the United States. Such a statement may well indicate Washington's willingness to compromise.

Not only is Beijing alone suffering from trade wars, but they are also causing a lot of trouble to other export-oriented countries. Take, for example, Germany. A fall in demand and other factors can drive a country's economy into a technical recession. The volume of supply of goods and services outside the Federal Republic of Germany in GDP exceeds 47%, while in the United States this figure is less than 20%. It is quite clear where the problems come from European automakers and in industrial production as a whole. So, the November figure was the worst since February 2016, losing 1.7% m / m.

The picture, of course, is grim, but further, apparently, it will be better. According to OECD estimates, the PRC economy has begun to show signs of recovery. Last year, the Asian state reduced taxes and fees, reduced standards for deductions to the mandatory reserves fund and expanded infrastructure investments. All this will continue in 2019. Although Reuters writes that China's GDP growth targets will shrink to 6–6.5% from 6.6%, China will remain the main driver of global economic growth. In this scenario, the Euroblock economy can count on improving external demand, moreover, the ECB is pinning its hopes on domestic demand. The improvement in the labor market, the intensive rise in average wages against the background of low inflation create favorable conditions for the growth of consumer activity and GDP.

In the meantime, there are a lot of negative factors on the USA in the form of a fall in business investment, a strong national currency, high corporate loan rates and a decline in the stock market. In the medium term, we can expect a bullish trend for the EUR / USD pair, but for this to happen, the weather in the eurozone economy should get better.

Now euro fans at least need to move quotes outside the consolidation range of 1.1265–1.1485 with subsequent testing of the January maximum.

It is worth noting that the euro and other major currencies are waiting for the results of the UK parliamentary vote on the country's withdrawal from the Eurozone. Volatility may be higher than normal. According to Bloomberg, seasonal price patterns suggest a possible strong destabilization of currencies in the next two weeks. Thus, the monthly historical volatility index from Deutsche Bank, which tracks the daily dynamics of 10 key currencies, grew 16 times in January over the past 20 years.