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    Dollar grew sharply due to the data on labor market, what’s next?

    Dollar grew sharply due to the data on labor market, what’s next?
    What concerns Friday’s outcomes, we can only repeat well-known fact – strong data on American non-farm pay-rolls were the reason of sharp rally of dollar. Herewith, we’d like to note that dollar closed the week with loss. From our point of view, the situation remains uncertain and doesn’t give clear signals of dollar’s further prospects.

    As usual, there is little statistics during the second week of the month. The only significant report will be the data on retail sales for May. It’s all right with forecasts, but this indicator has no stable dynamics – consumer activity has easily changed its direction for the last year. And increase in energy prices during last two months could provoke lower consumers’ desire to spend money. Weak retail sales will only highlight instability of economic growth. Usually the data on producers prices and preliminary confidence index of Michigan University are slightly less significant. We’d like to remind that next week FOMC session will be held and there is a high probability that the decision on monetary policy tightening won’t be made. Under such conditions it will be difficult for dollar to retain growth rates, which it showed on Friday.

    News background of main rival of dollar – euro isn’t very eventful either. German payment and trade balances, industrial production and the second evaluation of GDP for the 2nd quarter in the Eurozone are main events of the week. According to forecasts, unpleasant surprises aren’t expected. Still, there debt issue of Greece is still hanging over heads like a sword of Damocles. The agreement of IMF to combine all payments of this month into one payment at the end of the month gives time to continue negotiations and it means that in the short term it lowers pressure on the common currency. The saga continues and the end isn’t seen.

    This week local data are of some interest. First of all, it’s session of the Reserve Bank of New Zealand on monetary policy. For the sixth week in a row New Zealand dollar has been under pressure on expectations of further weakening of monetary policy by the regulator. The nearest session can become some kind of Rubicon – depending on its results, the pressure on currency will weaken or fall will speed up. Besides the Reserve Bank of New Zealand, economic data from Japan and the U.K. will attract attention this week. They won’t provoke global changes in the market, but they can influence local disturbances beyond the main trend of corresponding currencies.

    To sum up, this week the market can again face contradictory interpretation of current events, what may provoke regular sharp change of moods among investors and change of movement direction of the market.

    Speaking of today’s significant events, there are statistical data from Germany – payment and trade balances, industrial production. Negative isn’t expected, but positive forecasts can be not enough for considerable improvement of euro’s positions.

     

    Trade tactics:

    Friday’s sharp fall of euro creates preconditions for further decrease of the pair. Still, success of such attempts is under question. The common currency closed previous week on the plus side. Besides, on Friday bounce from minimums was quite strong – bears failed to keep below 1.1100 at the closure. Now we recommend to stay out of the market.

     

    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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