Vector Securities - Analytics

Vector Securities

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There is still consolidation…

There is still consolidation…

What concerns previous day, we’d like to highlight quite good final PMI of the Eurozone and good statistics from the U.S.A. – production orders and production ISM of NY were better than predicted. The market practically ignored both of them. From our point of view, trades are still technical, the market has taken a pause to consider current situation after sharp decrease of dollar’s index in April. Inactive reaction to positive American statistics attracts particular attention. It indirectly indicates that dollar is still in correction phase and demand for it is limited even at current levels. The lack of strongly expressed movement direction indicates market’s consolidation.

Several hours ago the Reserve Bank of Australia has announced its decision on rates. This time there was no surprise – the rate is lowered by 0.25 basis points. The market decided to play cat-and-mouse game and after first expected reaction in the form of decrease Australian dollar grew rapidly by a figure from minimums. Such behavior of Australian currency indicates the lack of single viewpoint on current state of the market. Still, many expect continued decrease of rates by the RBA this year. “Dovish” comments will stimulate such moods among players in the exchange market. So, the return of loonie to descending trend is just a question of time.

Speaking about the rest of today’s events, we’d like to highlight expected publication of forecasts on economic growth by the European Commission and statistics from the U.S.A. Actually, during last weeks economic news from the Eurozone have stabilized and don’t look so dramatic as at the beginning of the year. Moreover, improvement of some indicators has been detected, so the European Commission will hardly add much pessimism to euro. Dollar’s prospects are more complicated. Today reports on foreign trade for March and ISM in service sphere will be published. Strong dollar and outlined tendency of renewed growth of energy import, and first of all of oil, after fall of its price, create preconditions for sharp worsening of trade balance. In its turn, there is no confidence in continuation of growth of ISM in service sphere. There is no stable improvement of US economic indicators and it is a constraining factor for dollar. However, if the reality isn’t so pessimistic, then dollar will have chances to regain part of losses sustained last week.

 

Trade tactics:

The intention to “catch” middle-term movement is our weakness, so, sometimes we overstay our positions. This time we couldn’t avoid this mistake either, having decided not to close our long position on euro above 1.1200, deep location of the entry point allowed doing it. For euro technical picture has become complicated – testing of support at 1.1020 – 1.1050 is possible. There is no clear view on further behavior of the market. We are standing in purchase with stop at the entry point and waiting for further development of events.

 

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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