As a result of last week, the US dollar fell against the major currencies for the exception of traditional safe-haven currencies, particularly the Japanese yen and the Swiss franc.
Coordinated movements of major currencies in tandem with the US dollar are explained by the same investors' expectations for which the Fed's proposed actions regarding the monetary policy outlook are still a guide. This is a high probability that the regulator will continue to wait for the national economy, as well as globally.
Also, a significant role in easing the US dollar is played by postponing Brexit until October of this year. Although it retains a factor of uncertainty, it increases the hopes of supporters of maintaining Britain in the EU, which has a positive effect on the pound sterling rate.
One more weighty and negative reason for the dollar is the preservation of hopes that negotiations on trade between Washington and Beijing will be achieved. And again, although they are not expected to do something super positive, the mere fact of stopping the escalation of a trade conflict and the introduction of contractual trade into a certain course is already positive for financial markets and supports the demand for risky assets, which also contributes to the appreciation euro currencies and commodity group currencies.
In this regard, it is important to understand whether the further weakening of the dollar will continue. In our opinion, despite the statements by the Fed and many members of the Central Bank including the head Jerome Powell himself, who argued that the rates will not rise anymore, there is a possibility that inflationary pressure will increase. In any case, the inflation data published last week showed a sharp upward jump. Moreover, we can assume here that if it continues to rise then the Fed will have to raise rates at least once more this year. The Fed understands this and likely to pause while continuing to monitor the situation.
Assessing the overall picture, we believe that the lateral dynamics in the foreign exchange market will continue for some time.
Forecast of the day:
The AUD/USD pair was adjusted downward after reaching a local maximum. If it stays below the level of 0.7175 and drops below the level of 0.7160, there is a probability of continuing the correction to 0.7125.
The USD/JPY pair also had a downward correction as it was below the level of 112.00 and largely fell to 111.55, which will correspond to 23% Fibonacci retracement. Overcoming this mark will lead to a continuation of the fall to 111.30.
