Vector Securities - Analytics

    Vector Securities

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    High volatility isn’t expected this week

    High volatility isn’t expected this week
    The most interesting event of Friday was the data on housing market in the U.S.A. Laying of new houses and building permits increased sharply, what eventually weighed the balance in favor of dollar. Consumer inflation met forecasts, it continued slow growth and didn’t spoil dollar’s mood. Dollar’s index reached May maximums and aims at April’s maximums now.

    This week isn’t rich in economic events, at least, it concerns two main regions – the U.S.A. and the Eurozone. Considering significant reports, there are only data on houses sales in the U.S.A. In general, during last two months this segment of economy has shown significant improvement after long stalling. The forecast is positive. It means that in terms of internal factors, this week has no serious threats for dollar. There are few statistics in the Eurozone – speaking of more notable, it is preliminary data on activity in service sphere. The forecast is mixed, with the tendency to decrease. Greek epic seems to be close to the end. Greek parliament approved the agreement with creditors, Tsipras shook up the government – the dissenting left, in this regard Fronde isn’t expected from European parliamentarians either. After stress decay, the market returned to fundamental factors again – continued policy of quantitative easing in Europe, and expectations of monetary policy tightening by the Fed, what was facilitated by series of quite good economic reports during last two weeks. Such power of balance under lack of surprises facilitates further strengthening of dollar at moderate rates this week.

    Against such background speculators can pay more attention to local events, which are able to influence only separate currency pairs. First of all, it is session on monetary policy by the Reserve Bank of New Zealand. Lower prices for key export products put the economy in a difficult situation. Economic activity is falling, inflation is still decreasing. Regular decline of interest rate at the nearest session is practically undoubted. Disagreements are only about the value of reduction – 0.25 or 0.5 basic points. For New Zealand dollar it’s bad news, so its further decrease can be expected. British pound also demands attention – it faces minutes of the Bank of England and retail sales this week. The main interest is about moods of remaining members of IPS concerning increase in rates, Carney has already given hints. It also makes sense to pay attention to retail sales in Canada. Unexpected decrease of interest rate by the Bank of Canada provokes sharp weakening of Canadian dollar. But further rapid growth can face technical limits. Positive on retail sales will give grounds for respite and correction.

    Today informational background is quite weak – producers’ prices in Germany and payment balance in the Eurozone. At this moment these indicators aren’t very notable and usually they have weak influence on market’s dynamics. Publication of monthly report of Bundesbank is expected, where forecasts on economic prospects by German regulator will be of interest. Worsening of such forecasts will become an additional factor of pressure on euro.

     

    Trade tactics:

    Our plan for Friday, aimed at euro’s sale was successful. Short position from 1.0905 is opened, stop is already rearranged at the entry point. Nearest aims for today are in the range 1.0740 – 1.0760. Still, short-term indicators return to oversold areas again, what will restrain further decrease. To cautious traders we recommend considering the question of profit fixation below 1.0800.

     

    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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