Next week there will be several speeches by Fed Chairman Jerome Powell, to which the FOMC protocols will be added. It is likely that the positive mood of the head of the Fed may help strengthen the US dollar. In this case, the rest of the currency is waiting for a downtrend.
Trends in Asian currencies will determine the monetary policy of China. The theme of China and the United States is again on the first line of the daily financial agenda. On the one hand, the White House administration and the Chinese government are trying to establish a trade deal dialogue, while both leaders are building up confrontation.
The US President speaks of a possible severance of relations with China, reinforcing the words with actions against Huawei, to which the Chinese authorities promised to give an answer. If this plot develops, it can overshadow Powell’s positive speeches and damage the dollar.
Recent speeches by the heads of the Central Banks of developed countries and a number of international economists prophesy a general recession of the world economy at the end of the second quarter of this year.
Oil provided some protection against news negativity, but this driver may exhaust itself at the beginning of the new week. A portion of the statistics of GDP and unemployment of developed countries is likely to lead to a general decline in stock markets and, as a result, will cause an inflow of capital in dollars and securities of the US Treasury, and as a result, weaken national currencies.
An alternative scenario is a conflict with China, in this case, investors will return to the tactics of last year – the allocation of funds in major currencies. The past meeting between trade representatives of the countries hints at such a development of events. However, the results of this meeting did not lead to any specifics.
An important factor for the euro will be the size of the decline in Eurozone production, two times higher than similar statistics leaving Britain from the EU. It is possible that the pound in the future may show a faster recovery than the euro.
Statistics on oil reserves in OPEC will have a big impact on stock markets. Indices may fall if it turns out that countries have not reduced their volumes ahead of schedule, and demand is not recovering, with storage facilities crowded with cheap oil. In this case, the dollar will strengthen, despite the negative figures of producer prices. This will confirm the continuation of the economic downturn in May.
The press expresses suspicions and doubts about the rapid recovery of the Chinese economy. Hints about manipulating statistics figures are increasingly heard. If the fears are not confirmed, then the positive trend of Asian currencies will resume.
The first week of May is a traditional long weekend in Japan, Singapore and the UK. The month is known for another tradition – sales on stock markets, which can lead to a weakening of a number of national currencies and, as a result, to the strengthening of the US dollar.
The US currency will begin to strengthen after the next week’s flat. The economies of Asia and the European Union continue to attract investments in the hope of an early recovery, which translates into increased demand for the euro, yen and other major currencies.
If economic indicators and political decisions of the next week repeat the trend of the previous week, the dollar index may continue to fall, at least until the next weekend.
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The next week of April has a rich political agenda, especially regarding additional measures to support national economies. National governments and national central banks continue to expand the package of financial measures and incentives to support the securities market, business and citizens.
Monetary and humanitarian actions are already having a positive effect on stock indices, whose recovery next week will lead to an increase in demand for major national currencies. It can be strengthened by the fall of the US dollar – the country has to go through the peak of a pandemic.
The situation in the oil market and the deterioration of world statistics on the victims of Covid-19 can cancel this scenario. Investors are waiting for firm agreements from OPEC countries and a decline in the international dynamics of deaths / infections. If this does not happen, the dollar and gold will again act as protective assets.