Currency summary of the week. What awaits markets in the next sessions?

A good start to the year and positive moods were kept only two days. Relative silence and lack of market hype caused by recent geopolitical events, about which we wrote in this article, disturbed the market calm. The stock exchanges have not yet fully adapted to the new geopolitical realities. In today's weekly summary, we'll look at the main currency pairs and check what potential scenarios the market can treat us in the next sessions.

Last sale

Even in December, at the very end of last year, we observed a clear sale of the market (mainly the American one). Considering the market environment in which the supply occurred, I am more inclined to the profit taking version from 2019.  than panic escape. News from the trade front and hot announcements of signing the initial phase of the agreement (planned for January 15) revived the mood that caused the new year to start with high indexes.

Eurodolar gasps

December was extremely successful for the Eurozone currency. Due to strong uncertainty on the dollar, he depreciated against other major currencies. The EUR has benefited, which now, after strong increases from 26.12/1,11544, is testing a key level of support, located around 4. In the near future, we will probably see a correction at the above-mentioned price level. Recently, the pair's quotations have been at most for over XNUMX months. Is this the beginning of a longer trend? Not necessarily. From a purely technical point of view, we could deduce that this is the case. Fundamentally, a lot will depend on the political and economic situation in which the US economy finds itself.

EUR / USD chart, H4 interval. Source: xNUMX XTB xStation

There is no reason to count on a substantial improvement in macroeconomic data from the German economy. The nearest indicator readings may be better, but this will be due to greater consumer activity at the end of the year, rather than spectacular economic recovery. The increase in market dollar rates contributed to the balance increase by the US Federal Reserve. Uncertain situation  in the markets it still held the apparent appreciation of the dollar to the rest of the currencies. After its normalization and looser moods on the stock exchange, currencies such as the euro had the opportunity to strengthen (hence the recent moves on EUR / USD).

Strong dollar weakening is still ahead of us?

Recent macroeconomic data for the United States can be assessed as strongly mixing, albeit with a tendency to be positive. On the one hand, on December 30 we got very good readings about the balance of goods in the US. Most analysts expected the deficit to rise from USD 66,53 billion to 67,5-69,0. To everyone's surprise, the deficit fell to a ceiling of USD 63,19 billion. On the other hand, the stocks of wholesalers did not change much.

After last week's FOMC Minutes we know that Federal Reserve left interest rates unchanged. This decision was in line with market expectations, and therefore did not bring significant movements on dollar-related currency pairs. Fed members have lowered their forecasts for the unemployment rate, raised their GDP projections, and left inflation targets unchanged for the time being. The head of the reserve emphasized that the United States will sooner or later face a larger slowdown, which is visible in the global economy.

Chart USD / PLN, D1 interval. Source: xNUMX XTB xStation

The situation of the dollar against the Polish zloty looks interesting. We are now at November price levels where PLN 3,8041 had to be paid for one USD. Practically the last 4 candles (especially the one from the last session) do not indicate that the dollar in the coming days should strongly bounce above the lower support. We are in a fairly strong downward trend. From the EMA20 average, the demand movement on this pair was successfully pulled out. From the point of view of technical analysis, we should test the current level in the near future and carefully approach the issue of possible rebound (bearing in mind strong demand movements from early November).

Eastern force

Very rarely in my currency summaries, I mention currencies outside the "main" category. However, it is worth mentioning the Ukrainian hryvnia. Why? UAH last year recorded a 17% appreciation against the dollar, which gives it the first place on the podium of the largest increases (to USD) in 2019. I think that in 2020 it is worth getting interested in niche currencies (mainly exotic), which, thanks to relatively high interest rates and strong depreciation against the dollar or devaluation, have a chance to stand out.

Summation

The new week will undoubtedly be a test of events from a few days ago. Stock exchanges and currency markets will value risk and current geopolitical situation in their own way. Therefore, we should be quite cautious about current trends in currency pairs, considering how quickly the situation on Forex can change.