Yesterday's meeting between Fed Chairman Jerome Powell and US President Donald Trump put pressure on the US dollar. The meeting was also attended by the current US Treasury Secretary Steven Mnuchin.
The meeting discussed interest rates, low inflation, and monetary easing. Trump once again told Powell that the interest rate is still very high and needs to be lowered, drawing attention to low inflation and weak economic growth. The meeting also discussed the issues of trade with China and the EU. In the evening, in his Twitter, Trump wrote that he was pleased with the outcome of the meeting, but drew attention to the rates in the United States, which should be lower than in other countries. Let me remind you that in the period from July to October this year, the Central Bank has already lowered its short-term interest rates three times, which are currently in the range of 1.5%-1.75%. This was done to stimulate economic growth, which is slowing down against the background of declining global GDP growth and reduced investment by companies. Sufficiently low inflation in the United States will allow this to be done without any problems.
In the meantime, the World Trade Organization issued a report stating that the weakness of world trade will continue at the end of 2019 and will extend to 2020. According to the WTO, although the leading indicator of trade flows showed a slight increase in September compared with August, it remained much below the level corresponding to the average growth rate of world exports and imports.
Morgan Stanley no longer expects the European Central Bank to lower interest rates, at least in current economic conditions. According to yesterday's report, only a significant deterioration in the economic situation in the eurozone will lead to a revision of forecasts by the bank. Let me remind you that the ECB deposit rate is currently -0.50%. Although Morgan Stanley does not expect GDP growth to return to pre-crisis levels, the regulator will have enough stimulus measures to support economic growth.
Yesterday, a report on the confidence of American homebuilders was published, which went unnoticed by the market. According to the National Association of Home Builders, the housing market index fell to 70 points in November against 71 points in October this year. Let me remind you that the value of the index above 50 indicates positive trends. Economists had expected the index to be 71 points in November.
As for the technical picture of the EURUSD pair, it has not changed much compared to yesterday's forecast, as the growth that was formed in risky assets after Donald Trump's statements did not allow the trading instrument to get beyond the large resistance level of 1.1090. The bullish scenario will continue to be implemented only after it is possible to overcome this maximum, which will continue the upward correction to the area of highs 1.1110 and 1.1140. However, we should not exclude the possibility of a downward correction, as the breakout of the intermediate support of 1.1050 may push the pair to the lower border of the upward channel in the area of 1.1020.
AUDUSD
The Australian dollar fell against the US dollar after the publication of the minutes of the RBA meeting on monetary policy. It states that to achieve full employment and the inflation target, it is necessary to keep interest rates low for a long time, and if necessary, the regulator will resort to another easing of monetary policy. As for the good news, the report indicates a decrease in pessimism in the world markets, which may have a positive impact on the economy, but the risks to the forecasts for world economic growth are still shifted to the downside. The regulator also believes that low-interest rates and freer access to credit continue to have a positive impact on the housing market in Australia.
As for the current technical picture of the AUDUSD pair, the bulls have all chances to continue the medium-term upward correction, even despite the current decline of the pair. Trading is conducted in the area of major support of 0.6780, where the lower border of the ascending channel formed on October 2 this year passes. A rebound from this level and a return to the resistance of 0.6840 will only strengthen buyers' expectations for further growth of the trading instrument and its return to the highs of 0.6900 and 0.6960.
