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There is a tense week ahead

There is a tense week ahead
The last workday of the month didn’t bring surprises. The main expected event of the day (the second evaluation of GDP) was with downward revision of GDP as predicted and almost met forecasts. For dollar the difference of 0.1 % in comparison with forecasts wasn’t enough to improve mood. Besides, the rest of American statistics was contradictory (business activity of Chicago decreased, and Michigan Index was revised upward) and couldn’t support dollar. In addition, retail sales of Germany were considerably better than predicted. The uncertainty about Greece restrained euro’s growth – discussions about giving new debt tranches aren’t successful, so investors decided not to open new positions. Thus, the second half of the day finished almost with stalling in very narrow ranges. The exception was Canadian dollar. Still, there were reasons for higher activity – weak data on GDP.

As usual, the beginning of month is accompanied with eventful calendar. This week will be smash. The RBA, ECB, the Bank of England sessions on monetary policy, inflation in the Eurozone, the report on labor market in the U.S.A. – any of these events is able to become movement driver for the whole week. It is just a small part of economic events of this week. We’d like to elaborate on them. In the Eurozone the main event is formally the ECB session. Recent statements of the ECB representatives about readiness to increase assets buying-out in June had a negative influence on euro, now the market will expect confirmation of these words in accompanying communiqué or in Draghi’s speech. Certainly, the lack of such confirmation will be positive for euro. The second (but the first in importance) factor for euro will be Greece. This month Greece is to pay interests on credits in the size of 1.6 billion euro. The agreement on new debt tranches is stalling. Greek officials have already held a psychological attack by claiming that Greece is close to default as never before. However, creditors ignore such provocations. It is still unclear which direction the pendulum will choose. Certainty of this question will cause sharp movement in EURUSD pair to one or another direction depending on the decision. Speaking about inflation in the Eurozone, forecasts show that tense has slightly decreased in this question. Fall of euro and higher energy prices could give a push for increase in prices in May. Still, only official publication can finally confirm it. Forecasts on the rest of numerous statistics from the Eurozone this week (final data on PMI business activity, unemployment, production orders in Germany, unemployment and retail sales in the Eurozone) aren’t very negative either. In general, the situation remains unstable for euro. Launched program of quantitative easing by the ECB and Greece are long-term negative factors for it. Still, the economy shows some signs of stabilization and if American statistics don’t show obvious improvement, then technical factors (oversold of European currency) will push euro upward in the short term.

The Reserve Bank of Australia is also unlikely to make sharp movements at its session. Still, it has a desire to lower the rate of national currency further. Comments on outcomes of the session will show how great this desire is. However, this week there is a lot of statistics in Australia (inflation, GDP, trade and payment balances). This week Australian currency won’t be bored. British pound is in the same state. At this moment the Bank of England isn’t intended to act. So, any reactions to actions of own regulators will be short-term, further together with the whole market.

 What concerns US statistics, we’d like to elaborate only on unemployment report. For long time it was almost the one indicator that has constantly given positive figures, but the data for March was a cool shower for the market. If it becomes feverish again, it will be a heavy blow for dollar. The attitude towards dollar is based on expectations of monetary policy tightening by the Fed, and it requires visible confirmations of stable economic improvement, what we don’t see now. So, the labor report remains the strongest irritant for the market.

Summing up expectations for this week, we can say that euro has chances for repeated attempt of growth to recent maximums in the range 1.1400 – 1.1500 in terms of economic point of view as well as in terms of technical one. But without the decision of Greek issue, these chances are just desires. For dollar the matter is statistics – the lack of signs of economic growth doesn’t make bulls enthusiastic as before. We expect multidirectional movement of currencies with sharp change of movements this week.

Today in the Eurozone the focus is on German inflation. The situation has stabilized and it is a positive for euro. If forecasts are met, then euro can grow above 1.1000. In the second half of the day the data on personal incomes and expenses of the U.S.A. and production ISM will be published. It makes no sense to try to predict, as last reports have rarely coincided with forecasts. At American session the market will react according to the fact.

 

Trade tactics:

As we planned we sold euro from 1.0990 on Friday. Today’s decrease of the pair after opening of the market has allowed rearranging stop at the entry point. The second half of the day will show how stable this morning movement will be. We don’t exclude new attempts of the pair to break through above 1.1000. Till, euro doesn’t close below 1.0800, renewal of descending movement can be talked about with caution.

 

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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