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    The probability of prolonged dollar correction has increased

    The probability of prolonged dollar correction has increased

    On Friday dollar passed again its positions for no reason. Those who hadn’t taken a train on Wednesday, did it in the evening of Thursday and Friday. The Fed gave the ground to correction and players decided not to resist. Actually, on Friday only Canadian dollar was more nervous, demonstrating multidirectional movements after published set of statistical data, which showed dramatic failure of retail sales. However, Canadian dollar followed the market in the end. The market has entered the uncertainty area. Now there are no reasons to speak of change of trend, but correction can become more protracted. 

    Outcomes of the latest FOMC session on monetary policy suggest that now the market will pay more attention to the state of American economy and the reaction to published statistics won’t be strictly unambiguous in favor of dollar – to ignore negative and regain only positive. And these statistics are contradictory. With the exception of undoubtedly positive shifts of employment, other data are very uneven. This week several important reports will be published in the U.S.A. First of all, it’s data on housing, inflation, durable goods orders, final data on GDP for the 4th quarter. It is difficult to rely on forecasts – they have rarely coincided with the reality recently. We presume that this week the market will react following actual data, with frequent change of movement direction. Against such background most currencies will get more chances for development of correction in case of positive economic statistics for them. Preliminary indices of business activity for March and business activity by IFO can become a reason for euro. Forecasts promise growth, still, as we have already noted, it’s quite difficult to rely on them at this moment. For pound the interest is shifted towards inflation and retail sales. And here forecasts give chances for development of correction too.

    On the first day of the week there is the most interesting report – the data on houses sales in the secondary market in the U.S.A. Although a slight growth of sales is expected, still, this sector hasn’t shown clear dynamics for last months, so, there are several options. Last week ended not very optimistically for dollar, there is a potential for further weakening in the short term.


    Trade tactics:

    Last week dollar’s index closed the previous week with the black candlestick. Technically, it can be a strong signal for further weakening of dollar in the short term. Herewith, there is a high probability of frequent and dramatic change of moods. For today we consider two options for entering the market – EURUSD purchase from 1.0770 – 1.0780 or entering at the breakthrough of 1.0870 if the market doesn’t return below 1.0800. Herewith stop should be set far – at 1.0600, as movements may pass in wide range. In case of a pair growth of more than 30 points from the entry point, rearrange the 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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