Currency market review January 8, 2020
How are things in the foreign exchange market after Iran’s missile strike?
The dollar 🇺🇸 index closed the first week of 2020 at local lows, however, sellers did not succeed in withdrawing the instrument from the global bull market.
Analyzing the dynamics of the past week, the conclusion suggests itself that the bear's trends in this market are gradually losing strength, as they failed to break through the key level of support.
The weekly candle was fixed on Friday in a "doji" form with a long shadow pointing south. This picture speaks of the parity of forces in the field of support, which in turn shows the unwillingness of shortists to decline further.
Rising volumes in the area of support without a decline in quotations promise to intercept initiative by buyers. Based on the above factors, the conclusion suggests itself: after the respite, the market is more likely to prepare for a growth phase in the direction of the global rising market.
In addition to the usual fundamental and technical analysis on the agenda is the conflict between the US and Iran, which certainly adds piquancy and volatility in the foreign exchange market.
Today, information has appeared regarding the shelling of US military bases in Iraq by the Iranian side. In the moment, this news may trigger a downward momentum for the US dollar, but the most interesting thing will begin after official statements from Washington.
What will Trump say and do? In the case of active actions and a hawkish position, dollar quotes can soar, confirming technical analysis signals, if Trump is weak, the dollar will go on a downward tour, possibly in the medium term.
The dynamics of the single European 🇪🇺 currency last week gave high volatility to traders, while buyers were able to hold on to the most important short-term level of support.
Until the last minutes of the trading session on Friday, the situation remained controversial, and the struggle for the level did not stop, while the week closed favorably for buyers.
But most likely the European currency will suffer from the conflict between the United States and Iran in almost any set of circumstances.
The only question is whether it will be a rapid decline with the transition to an upward movement against the background of purchases by investors, or whether it will be sales.
More likely first option. At the same time, the formation of a "roller coaster" in the foreign exchange market is not ruled out, which will please speculators, but may confuse investors.
Buyers did not manage to bring the quotes of the Briton 🇬🇧 to the most important resistance levels, which we wrote about last week.
Against the background of uncertainty about further price increases, the bulls began to gradually curtail their positions, which helped to close the week in the negative zone, while the weekly candle closed with a doji bear candle, signaling to market players that they were ready to decline.
If we analyze it more shortly, then there is no specific signal to the short yet, as trade is still above the 1.3000 mark.
It is at this mark that large volumes of buyers are concentrated. While the level holds the price, sales are highly undesirable.
The general market sentiment remains controversial, but the apparent dominance of buyers has already come to naught.
At the same time, one should not forget about the possibility of escalation of the US military conflict in the Middle East. In this case, Britain as a key ally of the states will be forced to spend a significant share of the resources to participate in the war.
This will provoke a decline in assets and, almost certainly, will once again move Brexit, which will significantly bring down the price of the pound.
Not surprisingly, for many years they have been talking about leaving the EU, how much money investors have lost in the collapse, and practically no action has been taken.
Investors may be disappointed in the UK market, as recent events resemble artificial manipulation. One way or another, the pound fundamentally remains under pressure.