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    US report on labor confirmed its reputation of an unexpected reaction of the market

    US report on labor confirmed its reputation of an unexpected reaction of the market

    On Friday dollar once again dramatically changed the movement direction and strengthened considerably after publication of US report on labor, having regained all weekly losses at once. The number of work places appeared to be approximately by 20K higher than predicted, herewith unemployment level increased. The data are quite good, but not record. But even these figures are not in the focus of attention, the revision of data for last periods in the amount higher than 100K and growth of hourly rate wage attract attention. It is maximum increase in hourly rate wage for last several years, though it should be taken into account that a slight decrease was detected in the past month. It isn’t a trend yet, but it gives a hope for further improvement. Wage growth gives rise to the hope of increasing consumer demand. We’d like to note that the Fed has just expressed concerns about wages’ stagnation against the background of improved unemployment situation.

    This week there will be few American statistics. The report on retail sales will become practically the most notable. Most forecasts point at decreased consumer activity, what reduces dollar’s support. So, the dynamic of the exchange market can be multidirectional, focusing on local statistics. The utmost attention will go to news from the Eurozone. They are more numerous and significant – industrial production, final data on inflation for January and, besides, preliminary data on GDP for the 4th quarter for both individual countries of the Eurozone and as a whole will be published. In this regard much will depend on data both from Germany and the Eurozone as a whole. The forecast is quite optimistic – growth by 0.3% and 0.2% accordingly. Despite difficult situation, the economy of Germany and the Eurozone doesn’t fall into recession, but shows growth, albeit slow. It gives some hopes that the Eurozone will succeed to climb out of this challenging situation. However, if this forecast isn’t met and GDP indicator appears to be weak, then euro will face another sale.

    Pound also faces an uncertain situation this week. There are few data – it is practically only industrial production, and its forecasts are contradictory. Much will depend on the content of quarter report and the head of the Bank of England speech on inflation. The only reason for pound’s growth is the question of increase in rates. The weaker forecasts on inflation, the less hopes for their increase. Accordingly, if the Bank of England lowers its forecasts, then pound will fall.

    Today the week will start with publication of payment and trade balances of Germany. Specific changes aren’t expected – in both cases surpluses are stable. Lowered energy prices allow leveling off difficulties with decreased demand, though forecasts on export look quite good. And in contrast to US trade balance, it's just as the earth and the sky. Still, for last months the market has paid little attention to these indicators. Under lack of unexpected announcements by the officials, euro can try to improve its positions on this positive again.

     

    Trade tactics:

    After Friday’s closure of the market, technical picture isn’t very positive for euro, frankly speaking. Although the first attempt to break through below 1.1300 has been beaten off today, it is quite possible that there will be new attempts. However, fundamental forecasts of this week aren’t negative for the common currency. There is a furious fight in the pair – four days in a row with high volatility and constant change of the movement direction. We’ve decided to take a risk and opened long position in the pair from 1.1320, stop at 1.1275, initial aim at 1.1380 – 1.1400. In case of a pair growth above 1.1350, rearrange stop at the entry point.

     

    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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