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Dollar had its turn at last

Dollar had its turn at last
First, euro was collapsed yesterday. Benoit Coeure, French representative of the ECB made it, announced that in June and July the ECB would double purchase of bonds and could decrease deposit rate. This statement was unexpected and the common currency came down immediately. Then it was pound’s turn – the data on inflation were weak, below forecasts and British currency could only follow euro. European currencies got a new blow after publication of ZEW report – there was no miracle, components of the report also showed weaker results than expected. And after publication of the data on US housing, where 10% growth of building permits and 20% growth of laying of new houses were detected, everything became clear – all main currencies fell following European ones. Herewith previous data on housing market were revised upward. 
Today two main events are in the focus – minutes of the Bank of England and the Fed sessions. The first event is quite local and will mainly influence British pound. Recently hopes for increase in rates by the Bank of England this year have been quite high, regular data on inflation reduced such prospects yesterday. The confirmation of change of these hopes in minutes can be painful for pound and send it downward further. The Fed minutes will be global event for today. The fact that the regulator will confirm its intentions for monetary policy tightening is practically unquestionable. Another question is whether there will be changes in conditions under which it will be ready to start tightening and how significant the change of FOMC members’ position will be under circumstances of slowed economy of the U.S.A. The last session on monetary policy was against the background of weak economic reports what could shake the determination of some representatives of the Fed about terms of start of tightening. Increasing disagreement in this question is able to reverse the market rapidly. 
 
Trade tactics:
Rapid change of market’s moods didn’t give us an opportunity to assess the situation correctly and open short positions in EURUSD pair in time, though we presumed the reversal was close. This rapidity increases risks of sudden change of moods – strong support level 1.1040 – 1.1060 is ahead. So, short positions should be opened cautiously and set tough stop-orders closer to current prices to limit losses. To aggressive traders we recommend to consider euro’s sale in case of breakthrough of 1.1115 downward, stop at 1.1160. In case of a pair decrease of more than 20 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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