The last day of the month was unexpectedly volatile. Dollar sharply went downward in the second half of the day. Hot on the heels, it was proposed that the data on labor costs below forecasts became the reason. Still, from our point of view, despite all significance of this indicator in terms of inflation expectations, such explanation seems far-fetched. Although the indicator showed minimum growth for several decades, but in isolation from other data, such reaction of the market seems excessive. The more so since this indicator wasn’t so popular till this moment. Besides, such fall of the indicator was detected a year ago, but without such overreaction. We have already mentioned low liquidity caused by vacation season in one of our overviews. We presume that it is this very case. In such market any huge applications provoke sharp movements of the market with mass work of stops. In favor of this version speaks the fact of sharp rollback of euro from maximums almost at the levels, which were before the publication of the data.
The first week of the month is eventful. As usual, monthly report on labor from the U.S.A. is of first significance. According to dynamics of weekly applications for unemployment benefits, negative isn’t expected. Forecasts promise average growth of new work places for last months, slightly above 200K. It won’t be a surprise, much will depend on other components of the report – wage levels, average length of working week. Actually, this week American statistics give some hopes again – ISM activity indices, production orders, employment in private sector, everything is quite positive. Improvement of economic statistics is very vital for dollar on the threshold of FOMC session in September. Otherwise, its growth can’t be renewed. There is much more uncertainty about European statistics. It is quite possible that final indices of business activity will be revised downward, there is more confidence about fall of retail sales in the Eurozone, surplus of trade and payment balances is gradually decreasing in Germany. Probably, we can expect some positive from industrial production and production orders in Germany. Still, it can be not enough for the market to leave formed for last weeks ranges due to lower activity of players.
Considering local events of this week, we’d like to highlight the Reserve Bank of Australia session on monetary policy, the Bank of England session, British industrial production, the report on employment in Canada.
The first workday of the week has started without swinging for Canadian dollar, which fell at the opening – the Prime Minister of Canada announced dissolution of the Parliament and start of election campaign. European session will start with final data on PMI production activity in European midst. There are some risks of worsening indicators. In the second half of the day the focus will shift to American statistics – income and expenses, production ISM, building costs. According to forecasts, the beginning of the week will be dollar’s. Still, the reality will form depending on actual data.
On Friday we watched market’s flight on publication of the report with surprise, usually the market doesn’t pay much attention to it. Nothing promised such activity on the last workday of the month. Certainly, our position was closed on stop without loss. However, we decided not to believe this movement and took short position on euro for 1.1095 again, stop is set at the entry point now. Sharp rollback by the closure of Friday allows hoping that ascending trend of dollar is still in force. Short-term aim at 1.0910 – 1.0930, further everything is under question. To strengthen descending movement, EURUSD pair needs to close below 1.0900.
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