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FOMC minutes: there is nothing scary for dollar

FOMC minutes: there is nothing scary for dollar
The previous day started optimistically for dollar. Weak data on German production prices sent euro below 1.1100, but further the movement stalled. The uncertainty about FOMC minutes restrained players. As a result, yesterday they failed to decide finally what to do further after publication of minutes. On one hand, increase in rates in June is practically impossible, but almost all players have already accepted it. On the other hand, the Fed has slightly increased forecasts on economy and is intended to start monetary policy tightening at last, considering various courses of action not to collapse markets. The attempt to find out whether slowdown of economy in the 1st quarter was caused by temporary reasons such as weather or it was something more significant, took most of the time of discussion. The main signal for markets is retained – everything will depend on new economic data.

Today there are interesting reports both in Europe and the U.S.A. In the Eurozone it is preliminary data on PMI business activity for May. In general, forecasts are contradictory – improved activity is expected in France and decrease in expected in Germany. Such uncertainty gives euro chances for some improvement of its positions at European session, still, it will hardly give an impetus for renewal of wide-scale growth. In this situation it is better to look for a moment for sale. The U.K. will publish report on retail sales for April. After weak data in previous month analysts expect increased activity of buyers, what also gives pound chances for some improvement of its positions at European session. However, American statistics will judge all – houses sales in the secondary market, applications for unemployment benefits, business activity of Chicago and Kansas. After impressive data on housing market on Tuesday, there are some hopes that this growth is more large-scale on the whole spectrum of indicators at housing market. If American statistics show stable improvement of economy, then the issue of increase in rates in the U.S.A. will prevail again.

 

Trade tactics:

Our yesterday’s attempt to sell euro under breakthrough of 1.1115 downward failed – strong support at 1.1060 played its role, profit was minimal. Today we again recommend looking for entry point to open short positions in EURUSD pair. Now we consider sale in the range 1.1140 – 1.1150 with short stop at 1.1170 as the most interesting, but the most risky option. More certainty will be there in case of breakthrough of 1.1060 downward and closure of the day in the range 1.1000 – 1.1020. The moment of breakthrough of 1.1060 downward can be also considered as a plan for sale with stop at 1.1150. If this time this level resists again, then euro’s chances for reversal will increase significantly.

 

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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