Vector Securities - Analytics

    Vector Securities

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    The market is focused on American statistics

    The market is focused on American statistics
    The impetus given by French representative of the ECB at the beginning of previous week came to its logical conclusion on the last day – dollar grew sharply again. This time the reason was US report on inflation. If in the first half of the day dollar was somehow pressed after publication of IFO report, which was better than predicted, then after the data on inflation everything changed dramatically. It can’t be said that inflation showed something outstanding – the data practically coincided with forecasts, but they were within expectations of improvement of economic indicators in the 2nd quarter and on the threshold of long weekend investors preferred to stay in dollar. The speech of the Fed head Janet Yellen, who expressed the hope that monetary policy tightening would start this year and approaching deadline of interest payment by Greece were additional factors, which supported dollar.

    This week the exchange market will choose movement direction relying only on one thing – whether American statistics will be a cold shower for outlined return of dollar to growth trend or not. There are two reasons for concern – durable goods orders and second evaluation of GDP for the 1st quarter. It makes no sense to rely on forecasts as they rarely coincide with the reality. In case of weak data expressive change of moods, similar to the one last week, is possible. Economic statistics of other regions can bring only temporary inconveniences to dollar. This week the Eurozone will provide very few significant data – retail sales in Germany and series of reports on Italy and France. In general, the economy of the Eurozone shows quite good results, better than could be expected. But this suspense with Greece makes investors feel too nervous. Eternal expectation of default doesn’t facilitate increase of trust towards the common currency. Speaking of local events of this week, we’d like to highlight the second evaluation of GDP for the 1st quarter in the U.K., the Bank of Canada session on monetary policy and a large set of economic data in Japan on Friday. Even in case of positive statistics the reaction of currencies will be only short-term and it will return to the main trend in any event.

    Today there is a day-off in the U.S.A. – Memorial Day, some of markets are closed. There is the lack of significant events, but it may not become an obstacle or pause for continuation of dollar’s growth as last week finished very promising for it. On the weekend the Minister of the Interior Nikos Vucis claimed they had no money for IMF in June. Now it is unclear what this statement implies – the real financial state or blackmailing. It is really strange that this phrase came from the Minister of the Interior, and not from the Minister of Finance, still, it creates certain background for euro. Herewith the common currency has opened the week with regular local minimum and has all chances to continue movement in this direction during the day.

     

    Trade tactics:

    Last Friday was nervous. False upward breakthrough in the first half of the day provoked us to buy euro for 1.1190, we closed our position for 1.1110 after publication of report on inflation, not waiting till stop worked, which was preset at 1.1090, as we had supposed at the beginning of the day. We entered the market for the second time under breakthrough of lower limit of the range – we opened short position for 1.1060. At this moment we retain short position with short-term aim 1.0920 – 1.0930, where we will analyse the practicability of further being in the market. Short-term technical indicators have already given signals of pair’s oversold, what can provoke pause in continuation of descending movement.

     

    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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