June 1-5, 2020. Summer starts with a flat

2020-05-31

The last week of spring is characterized by long-term trends. The US dollar lost a little position, which contributed to the strong growth of major world currencies. As a result, their quotes came close to important support / resistance levels. Usually after this, corrective movements begin. However, the extreme value of currencies coincides with an important fundamental event – a meeting of the ECB, the Central Banks of Canada and Australia. This makes correction forecasts less clear.

The monetary policy of the Central Banks is unpredictable, now they are forced to seek and apply new forms of stimulating the economy, which in turn makes the market reaction unpredictable. The complexity of the analysis is increasing due to the unequivocal readiness of the United States for sanctions against China due to the events in Hong Kong, possible solidarity on this issue from other countries and China’s retaliatory steps.

At any moment, the correction may turn into a short flat, which is enough to remove overbought / oversold, so that major currencies can continue the “anti-crisis” rebounds that began at the end of March.

Given this uncertainty, we should wait until this week to clarify the ECB’s monetary policy. This may be a good signal for continuing medium-term investments in currencies of developed and developing countries amid a weakening US dollar.