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    Accelerated growth of dollar increases risks of sudden correction

    Accelerated growth of dollar increases risks of sudden correction

    The only thing that we can say about yesterday’s trades – euro is falling. All reasons are announced and we have nothing to add. However, it is not only a matter of euro’s weakness. But the matter is also dollar’s strength. Its attack is along the whole front of currencies. There is always some reason for it. Yesterday British pound raced after euro after weak data on industrial production. Still, dollar’s correction is inevitable, the only question is when.

    Today there are several interesting economic reports, still, it is highly questionable whether they can change current balance of power. Several European countries will publish final data on inflation for February, the Eurozone will release the report on industrial production. Preliminary data showed slight stabilization with inflation, German data on industrial production were also positive. Still, the market ignored all of this. So, it makes no sense to get hopes up over European statistics. Apparently, today the main focus will be on US report on retail sales. Market’s reaction will depend on its results. Forecasts are positive and if they are accurate, then dollar’s strengthening will continue.

    Speaking of local data, the focus is again on pound – today there will be report on foreign trade, traditionally weak indicator in British economy. Last years it has attracted little attention, as a rule. Still, taking into account accelerated trend of dollar and yesterday’s weak data on industrial production, negative data on trade balance will push pound downward.

     

    Trade tactics:

    Yesterday we closed our short position on euro with over-fulfillment of the plan for 1.0580. Although there are no signals of market’s reversal, we are afraid of sudden and sharp correction – unidirectional movements aren’t eternal. Now we prefer to take a pause for some time. We don’t see grounds for euro’s purchases even at current levels.

     

    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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