The results of the elections to the European Parliament, which will be held from 23 to 26 May, will determine not only the future political picture of Europe, but also predict the monetary policy of the Central Bank of Europe.
The current head of the Central Bank of Europe, Mario Draghi, will leave office in October, but the candidacy of the successor will be roughly known by the results of the number of seats occupied by the EU political parties in parliament. The uncertainty of the future monetary course will also lead to a temporary outflow of funds from positions in euros.
Among the minor news can be noted the start of negotiations on candidates for the post of Prime Minister of Great Britain (Theresa May will leave him in June) and a possible escalation in the “Iranian direction”.
The United States has closed the possibility of exceptional oil supplies from Iran to eight countries, but China demonstratively violates this ban by openly unloading tankers. What response will these events cause, what results will the investigation of an attack on tankers in the UAE come to, how will the additional US military forces end up on the shores of the Islamic Republic? Answers to these questions, and related trends in the foreign exchange markets, we are waiting for this week.
The main event of the coming week will be the trade war between the two strongest players in the world – the United States and China. But at the initial stage, the mutual recovery of higher duties may not lead to significant changes in the dollar rate. The US currency may continue to weaken and complete a technical rebound in order to remove oversold.
The scenario of a sharp strengthening of the dollar index is possible only in the case of a designated date for the introduction of new duties on the segment of Chinese imports reaching 325 billion a year. At the moment, 25% of the additional charges for the supply of products from China to $ 200 billion are beginning to operate.
Obviously, traders will wait for the reciprocal steps of China, which have already been promised by the government, and then they will assess with what economic indicators countries came to the beginning of the conflict in order to predict the damage. Based on these considerations, the formation of the medium-term trend in the Forex market will begin, approximately the end of the week.
The other pole of international tensions is Iran, which is trying to blackmail European partners with a way out of the “nuclear deal” so that they can put pressure on the United States and achieve a relaxation of sanctions. As a result, the country had the opposite effect – the expansion of restrictions on the export of metals and the negative reaction of partners, including China – the main buyer of oil.
Among the minor hotbeds of tension, North Korea is notable, affecting the rates of Asian currencies by rocket launches, and the lengthy conflict in Venezuela, which the United States can refuse to support, disappointed in the opposition, which will somewhat ease tensions in the oil market.
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The most important event of this week will be trade negotiations between the United States and Japan. Negotiations will be held in Washington, they will hold the ministers of economy of the two countries. This is a meeting of long-standing trading partners, so problems with the subsequent ratification of the agreements reached are not expected. This should help strengthen the rates of both the dollar and the yen.
Also, the economic negotiations of China with the countries of Central and Eastern Europe. This usually does not lead to large movements in the currency markets.
Thus, the upcoming week is expected to calm for trade. You should also note that the trading week will be short due to the beginning of the celebration of Catholic Easter on Friday, and the next Monday of April 22 will also be a day off.