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The dollar is growing, but investors do not believe in the strengthening of the American



The dollar turned to growth on Wednesday, which caused the index to return to the upper border of the descending channel for the last four months. In contrast to the impulse at the beginning of the week, the strengthening of the dollar this time took place simultaneously with the recovery of risk appetite: Nikkei225 added 1.4% on Thursday, and MSCI Asia-Pacific region without Japan returned to historical highs. On the US debt market, 10-year Treasury yields rose in the morning from 1.08% to 1.11%, but still remain well below the weekly highs of about 1.18%. The rise in stocks and the decline in bond prices are somewhat at odds with the dynamics of the dollar, which is often under pressure amplifies in similar circumstances. Thus, in the near future, investors will have to look for an answer to the question of which instruments should be taken as an indicator of a stable trend. In the foreign exchange market, a reversal of the short-term trend may be signaled by the renewal of the week highs by the dollar index. In this case, we will see the start of a deeper correction or even a return to growth with the nearest potential targets at 91.3 and 92 by DXY. For EURUSD, 1.2070 and 1.1950 will act as similar targets for the pullback. Approaching the levels below 1,200 may even force participants to reconsider the current extremely negative attitude towards the American currency. However, it is enough to look at the dynamics of the pound and the yen to raise doubts about the interest in the dollar as a protection against market risks. GBPUSD remains close to local highs with considerable support from the head of the Bank of England, who recently confirmed his reluctance to resort to negative rates. The pound is very sensitive to the attitude to risk of global investors. Maintaining close to 32-month highs after a short correction suggests demand for risks. USDJPY bounced from 102.50 earlier in January, now trading above 104. The yen’s weakness is also visible in pairs with the euro and pound, reflecting investor interest in risky assets as opposed to the Japanese currency. which is often used to secure margin trades .____________ Alexander Kuptsikevich, Lead Analyst, FxPro

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