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Dollar Still Has Potential to Continue Its Growth

On Friday, the last day of September, Donald Trump held a series of meetings with those who may be the next Fed chair. By doing so, the US president caused reduced volatility in trading in financial markets. Kevin Warsh, who is also the youngest appointment in the history of the Fed, was among the candidates and is known for his commitment to tighter monetary policy, i.e. Warsh is likely to raise interest rates. Also, he is remembered for being the only Fed official who expressed doubt in the rationale for expanding the monetary easing program.

Nevertheless, the situation in general became less tense on Monday. Local trends that have been forming since mid-September continue to pick up momentum. The EUR/USD pair has approached the local low at 1.171. After the level is broken, the fall may continue down to the levels at 1.158-1.16. The USD/JPY pair is trying to keep on climbing. It is being traded near the 113 area. For the GBP/USD pair, the target at 1.32 and below is still current. A fall may occur down into the 1.31 area, where the 50-day moving average is crossing.

The Dollar Index today tried to hit above Friday's peak at 93.5, however on Monday it did not manage to do it. Nevertheless, the level will keep on being attacked in the nearest future. It is worth mentioning that September was the first month to be positive for the Dollar Index over the past 6 months. Apart from the US dollar, American stock markets also showed a consistent growth in September. The SP500 index has been trading at the 2520-point area. Protective assets, in contrast, are being understandably under pressure.

In the short term, this kind of dynamic might continue. This week the US dollar is likely to get triggered. Employment data are expected to be released, and some of the FOMC officials are scheduled to give a speech.

This week's dynamics of the ruble might be affected by oil prices. Brent oil is locally in a downtrend within a correction, the movement may strengthen towards $55.5-$54.5 per barrel. Attempts by the US dollar to continue its correction also play against the ruble; the correction started following the last Fed meeting. The drivers that may support this growth have been mentioned above. Also, Russia's inflation data will be published this week, which has been closely monitored by an increasing number of investors, considering the central bank's commitment to the 4% target. It is likely that the CPI will increase from the current 3.3%, yet within the target level.

From a technical perspective, the USDRUB currency pair is being traded in a narrow uptrend at the 57.8 level area. Taking into account a set of bearish factors, the currency pair being within a technical pattern may continue its climb aiming at 58.70.

Ivan Kapustyanskiy, equity analyst at Forex Optimum

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