On the last day of previous week US retail sales couldn’t calm down investors – they were not only worse than expected, but even in minus. As a result, we get another fall of stock indices and energy prices, growth of euro and yen, drop of all other currencies. The week finished in the same minor moods, as it had started.
Another work week will start with sway. This day is a day-off in the U.S.A. – Martin Luther King, Jr. Day. A part of markets, including stock one, is closed. Therefore, in the second half of this day low activity of players can be expected. Such respite will be very propos for investors, who are confused due to much negative data, coming down on markets. Weak economic statistics on almost all world regions can be a signal of renewed recession worldwide. Under such conditions market face changes of mechanisms of currencies’ movements, their strong miscorrelation and higher volatility. Risks increased sharply. This week there is little statistic information from the U.S.A. – inflation and report on housing market are of most interest. And if housing market is all right now, then it is difficult to expect inflation to bring some positive against the background of fall in resource prices. Weak inflation can only aggravate current state of the market – consequently, new speculations are possible that instead of further monetary policy tightening the Fed will have to start a new round of quantitative easing. Dollar’s movements remain generally difficult to predict. The exchange market has already divided into separate fragments, the factor of local news has increased for some currencies, and such state is likely to last in the nearest future.
What concerns euro, there is a difficult week ahead. Speaking of economic indicators, there are final data on inflation for December (low significance under lack of notable revisions), the report of German institute ZEW (forecasts point at probable decrease of moods among investors, what will have short-term pressure on euro, herewith there is no guarantee of renewed descending trend), preliminary indices of PMI business activity for January (after bounce from minimums in previous months, these indicators have stabilized, and there is no clear dynamics. If there are better than predicted, then they can be used for upward correction of the pair). This year fall in stock indices and mixed economic statistics from the U.S.A. have become main reasons for euro’s growth. If these factors are retained, then euro will have chances for growth this week. Still, Thursday’s session on monetary policy by the ECB will be main driver for euro. Most analysts tend to believe that the ECB will widen stimulation measures this year. Everything depends on terms. If on Thursday the ECB continues to keep pause, then probability of euro’s growth to new annual maximums will increase considerably.
What concerns pound, weak economic statistics and poorly grounded speculations about exit of the U.K. from the EU made pound one of main outsiders of the exchange market this year. This week there is retail sales, inflation, unemployment. Forecasts don’t promise anything good – low inflation, wages are falling, retail sales are slightly better. Technical indicators are firmly standing in oversold areas, but there are no signals of correction. Weak statistics can only push down the pair further.
Yen benefits from its position of safe haven. Hardly anyone remembers it now. In the middle term this currency seems to continue its growth.
Canadian dollar is one of main outsiders. Main losses are sustained from fall in energy prices. This week Loonie fully depends on the Bank of Canada session on monetary policy. Analysts’ opinions vary – some presume that BoC will decrease interest rates, others think that fall of Canadian dollar allows regulator to keep a pause under conditions of low inflation and not make sharp movements. From our point of view, it doesn’t matter in the short term, Canadian dollar will face correction this week. And the rule “buy the rumour, sell the news” is still relevant. Outcomes of BoC session can become just a reason for profit fixation. Herewith long-term trend will remain descending for Loonie anyway.
Australian and New Zealand dollars as well as Canadian one, suffer from fall in resource prices, but they depend more on the situation in China. If negative tendencies develop in China, then they can become "whipping boys".
This weekend sanctions against Iran were partially lifted, so Iran can export its oil legally now. At the opening of the market this fact was reflected – oil and trade currencies shrank. Still, “shock” disappeared quickly and there is high probability that the rest of trade day will pass without sharp movements in currencies’ consolidation. The decision is long-awaited, so it is included in energy prices. Now it is time to fix profit.
At this moment we find it difficult to take position on EURUSD prospects, we’ve started to pay more attention to other currency pairs. We consider USDCAD sale in case of today’s repeated testing of Asian maximums, stop at 1.4700. The reasons of our interest to sale of this pair are mentioned above, in our overview. In case of a pair decrease of more than 30 points from the entry point, rearrange stop at the entry point. The nearest aim is at 1.4420 – 1.4440.
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