Vector Securities - Analytics

Vector Securities

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First trades of the year: inflation, geopolitics, collapse in stock markets

Previous day leaves mixed impression. It is primarily due to the fact that forecasts on main economic indicators weren’t met. American production ISM decreased again, still, the market ignored this fact. The focus of market players was on German inflation, but it started to slow down unexpectedly. The issue of new inflows of liquidity by the ECB is looming again. This argument was decisive for European currencies. Yesterday dynamics of oil prices had considerable influence on trade currencies. If in the first half of the day weak production PMI of China made players sell trade currencies and provoked collapse in stock markets worldwide, then further movement was defined by oil prices. Sudden tension between Iran and group of Arabian countries headed by Saudi Arabia caused higher volatility of oil prices and trade currencies followed these prices yesterday. Herewith fall of stock indices did not lead to weakening of dollar. This time geopolitical tension became the factor, which supported dollar – its attractiveness increased on investors’ strive to avoid risks.
Today inflation is of most interest again – this time in the Eurozone as a whole. Weak data on Germany for previous day can draw with it overall inflation of Europe. Although yesterday the market regained largely this fact, but testing of new minimums of euro is quite possible. 
 
Trade tactics:
Our yesterday’s entry into the market was successful – euro’s sale paid its way. However, we preferred not to tempt fate and closed short positions below 1.0800. Repeated testing of these levels with renewed minimums is possible, but stability of this movement causes doubts. At this moment our technical indicators give contradictory signals, the pair’s return to 1.0900 and consolidation in the range are possible. Now we recommend taking a pause and watching the market. 
 
Any opinions, advice, news, research, analyses, prices or any other information presented on this webpage is provided as general market commentary and does not constitute investment advice. "Vector Securities" shall not be liable for any loss, including loss of profit, which may arise directly or indirectly from the use of this information. 


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