Average volatility over the past five days: 69p (average).
The EUR/USD pair continues to trade calmly and slowly on Monday, May 18. Quotes did not move at all in the morning, and movement only began in the market during lunch. It cannot be said that there has been a surge of emotions in the market at the moment. The pair rose around 40 points in the US session, that is, the volatility now, as in the good old days, is low. Traders have certain excuses today. No macroeconomic statistics were planned on the first trading day of the week. Moreover, Mondays, in principle, very often are either corrective or are like semi-weekends. Therefore, there is nothing surprising in the sleepy state of the market.
Although there were no statistics on Monday, this does not mean that nothing is happening in the world and there is no news. Of course, the main newsmaker is still US President Donald Trump, who last Friday fired the Inspector General of the US State Department, Steve Linick, and immediately came under a new investigation initiated by the Democrats. This was stated by Senator Robert Menendez and member of the US House of representatives Eliot Engel. In their opinion, Linick’s resignation was politically motivated. Thus, Trump is again at the center of the investigation, and his name will once again appear in an unpleasant light. Actually, the US president is no stranger. It is difficult for us to even remember or find relevant information about the last time there was such a conflicted US president. It is one thing to be at odds in the international arena, in this case, actions can be justified by concern for your own country and nation. But Trump has enemies – half the Congress and half the Senate. If earlier you could consider Russia, the Middle East countries, where wars are constantly being waged, as the US opponents’ in the world, now this list also includes the EU countries (Trump also introduced trade duties against them), and China, with which there is a full-scale conflict involving several spheres of activity and areas of the economy. Thus, it is even difficult for us to guess who benefits from Trump’s activities at all.
You can’t call him a bad president, because with him the economic recovery in the US continued, which began in the era of Barack Obama. Unemployment continued to fall, the labor market continued to grow, and GDP continued to expand. But it was Trump’s conflict, the inability to work in a team with other politicians, political forces and countries, that led to the fact that now the US leader does not have any advantages. Yes, you can blame the coronavirus for everything, but it only exposed the problems of a country ruled by Trump. Because for the American president, numbers, results are important, and the population, people, workers and so on are nothing more than a means to an end. In principle, political scientists may object that in many countries around the world things are the same. But the whole question lies in the fact that the US president must possess a set of qualities of a leader of a nation who knows how to think ahead, decades ahead, and understand the consequences of his actions for future generations. Trump has the qualities of an excellent businessman, but not the leader of the nation. Therefore, almost half of US politicians want his resignation. It is safe to say that in the Republican Party there are a huge number of opponents of Trump’s policy who simply do not want to quarrel openly with the president, who almost immediately dismisses employees who are objectionable to him.
According to Democrats, Linick was probably fired at the personal request of Secretary of State Mike Pompeo, after he launched an investigation into the head of the State Department. Experts say that Linick has been the third official that Trump dismissed, who investigated possible illegal actions of the authorities. And this is only for the last month. Obviously, there will be no new impeachment procedure. But Trump is only once again lowering the chances of his own re-election in November.
Average volatility over the past five days: 123p (high).
The GBP/USD pair started to adjust on May 18 after several days and even weeks of downward movement. However, the downward trend is visible to the naked eye, so for now we believe that the declining movement will continue. The pair can only adjust against the current downward trend. The approximate goal is the Kijun-sen line. We continue to believe that the GBP/USD pair is mainly influenced by technical factors in the short term. Last week’s macroeconomic reports were almost completely ignored. However, traders also have a fundamental background at their disposal, which, despite all the same problems in the UK and the US (the coronavirus epidemic, the world economic crisis), continues to put pressure on the pound. Simply because the British economy continues to look the weakest. We have written about Brexit many times, and nothing has changed on this issue at the moment. A few weeks ago we mentioned that negotiations between London and Brussels would resume, and later reported that the first round of negotiations had not been optimistic and there was also information that the second round of talks also ended without much progress.
This time, the parties were generous with comments. For example, Michael Gove said that the UK could not conclude an agreement on such terms, but noted that “a deal must be concluded”. He calls on the EU to be flexible in negotiations. The most pressing issue now is the access of vessels from the EU to UK territorial waters for fishing purposes, but other problems are reported in the negotiations. For example, Irish foreign Minister Simon Coveney says that London has significantly changed the customs rules for processing goods at the border between Ireland and Northern Ireland, agreements on which were reached in the fall of 2019. Thus, according to EU representatives, London is changing the terms of the deal and does not want to make concessions or offer a reasonable alternative to the proposals of Brussels. As a result, Michel Barnier said that he was disappointed by the lack of desire of Britain to complete the negotiations and accused Britain of wanting to have access to the EU single market, while not wanting to take on responsibilities. Chief negotiator from the UK David Frost believes that the EU wants to “bind the country to the laws, norms and standards of the EU.” “As soon as the EU realizes that we will not go to an agreement on this basis, we will be able to make progress,” Frost concluded.
Recommendations for EUR/USD:
For short positions:
The EUR/USD pair began a new round of upward movement and even crossed the critical Kijun-sen line on the 4-hour timeframe. Thus, it is recommended to consider selling the euro with targets in the 1.0780–1.0750 range only if you take profit below the Kijun-sen line.
For long positions:
Buy orders can be opened in small lots now with the goal of the Senkou Span B line (level 1.0886), since traders have overcome the critical line.
Recommendations for GBP/USD:
For short positions:
The pound/dollar began to adjust against the downward trend. Thus, traders are advised to resume selling the pair with the target of 1.1987 in the event of a price rebound from Kijun-sen.
For long positions:
It is recommended that purchases of the GBP/USD pair be considered with a target level of 1.2325 after consolidating quotes above the critical line, but with small lots.
*The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.