The weekend went quietly enough: on Monday, the euro-dollar pair continued the trend of Friday, demonstrating a weak but steady rise in price to the upper limit of the price range of 1.0980-1.1090. In turn, the dollar index continues to fall, despite the telephone conversation between representatives of China and the United States on Saturday. Dollar bulls actually ignored this fact, although judging by the Ministry of Commerce of China, the parties agreed to "maintain close contact" in the framework of further negotiations. But the dry, formal formulations of the communique released did not impress traders: it is obvious that negotiations between Beijing and Washington are moving hard, while barrage duties continue to have a negative impact on the global economy in general, and the economies of the United States and China in particular.
Therefore, investors need clearer signals about the timing of the negotiation process and the prospects for ending the trade war. Duty phrases that "the dialogue took place in a warm, friendly atmosphere" leave more questions than answers. But the possible comments of the first persons of the US and China regarding this topic will provoke strong volatility in the EUR/USD pair. If the parties de facto tighten their positions, the dollar will fall under a wave of sales, as the likely escalation of the trade conflict will entail a reduction in the Federal Reserve interest rate at the beginning of next year.
By and large, the economic calendar of the foreign exchange market (especially with regard to the EUR/USD pair) this week is not eventful. Today, the Bundesbank's monthly report is of some interest. In this document, the German central bank assesses the current economic situation of the country and the eurozone as a whole. As you know, the German economy is the leading among the countries of the eurozone, so traders carefully monitor the dynamics of the main German indicators. Particular attention will be paid to inflationary expectations. If the Bundesbank significantly lowers its forecast values, this could negatively affect the euro - especially in anticipation of a speech by the head of the ECB on Friday.
We will listen to Fed spokesman John Williams on Tuesday, who heads the Federal Reserve Bank of New York. Last week, he commented on the current situation. According to him, the US economy is in good condition, and the interest rate is "at an optimal level," but the continuing uncertainty in trade has a negative impact on business. At the same time, he stressed that the Fed is unlikely to continue to lower interest rates if there is no "sudden deterioration in the economic situation." He has already voiced such theses more than once over the past months, so tomorrow he is unlikely to surprise the market with other phrases.
In general, we can find out about the current mood in the Fed on Wednesday, when the minutes of the last meeting of the regulator will be published. Let me remind you that at the end of the October meeting, the Fed lowered the interest rate, but at the same time clearly tried to maintain a balance between the hawk and dovish attitude. On the one hand, Fed members removed the phrase that they were ready to "take appropriate measures to support economic growth" from the statement. They replaced this wording with a promise to monitor incoming data in order to "evaluate the appropriate rate path for federal funds." Translated into human language, this means that the short-term cycle of interest rate adjustment is completed, and now everything will depend on the incoming data - that is, the regulator takes a pause for an indefinite period. On the other hand, the Fed critically assessed the general state of affairs in the US economy. The regulator acknowledged that uncertainty regarding future prospects still remains, general and core inflation is below the targeted two percent level, and economic activity is growing at a "moderate pace." Fed members also noted a negative trend in the areas of export and business investment.
The minutes of the October meeting published on Wednesday will make it possible to understand what sentiments prevail in the Committee. Most likely, most members of the Fed advocate to maintain a wait-and-see position, and this fact can provide background support to the greenback.
But a similar document will be published by the ECB on Thursday. But the minutes of the last meeting of the European regulator will probably be ignored by the market: I recall that this was a farewell meeting for Mario Draghi, where he essentially summed up his 8-year- cadence.
Friday's speech by Chrisine Lagarde is much more interesting, who in November officially took the helm of the European Central Bank. This is not her first public appearance as the head of the ECB, but the second in Germany. She will make a speech at the Banking Congress in Frankfurt, where she can voice her vision of the situation in the eurozone economy in the context of monetary policy prospects. The vector of movement will depend on the tonality of its rhetoric - it can positively assess the latest data on the growth of European inflation and the German economy. But on the other hand, it can focus on another aspect - the continuing uncertainty in trade. Lagarde is unlikely to announce any specific "action plan", but its general mood will allow traders to draw the appropriate conclusions to traders.
From a technical point of view, the EUR/USD pair is stuck in the range of 1.0980-1.1090 (the lower line of the Bollinger Bands, which coincides with the lower boundary of the Kumo cloud on the daily chart, and the middle line of Bollinger Bands, which coincides with the Kijun-sen line, respectively). If the bulls of the pair overcome the upper limit of the range, they will open their way to the next resistance level - 1.1180, which corresponds to the upper limit of the Bollinger Bands on the same timeframe.
