The last work day of the month was unexpectedly active and contradictory. Well, European unemployment improved slightly and American statistics were slightly worse than predicted, still, the reaction was too impetuous. At some point quotes reached almost the levels preceding FOMC session. Thereafter, it was followed by change of moods, at least against euro. By the end of the day trade currencies grew on increased energy prices, pound rose on the threshold of the Bank of England session. Herewith euro’s growth was minimal. The market can’t find “main path”, continuing to fluctuate in wide range with constant change of direction.
This week news background is rich, US report on labor market will become the crown of it. This very report is likely to provoke the most active movement of the market. Previous one was unexpectedly weak, herewith market’s reaction was strong, but short-term. Recently it has become typical for the market. The market remains closed in the range, movements live not for long. Not only number of new work places of expected report is important, but its growth of wages. Indirect signs let us hope for improvement of report’s components – weekly applications for unemployment benefits for last month showed descending tendency. Meanwhile, other American economic indicators, which are to be published this week, will hardly give some advantages to dollar. Forecasts are mixed on ISM, production orders, trade balance. Their weakness will facilitate continued stalling in current range. In its turn, dollar’s main opponent in the exchange market, euro, can’t provide sufficient arguments in own favor either. Speaking of the Eurozone’s main indicators of this week, there are final data on PMI business activity, retail sales, production orders and industrial production in Germany. Forecasts promise only slight improvement, which won’t be able to give considerable advantage to euro. This week final balance of power will be determined only after publication of the data on US labor market.
This week two more regulators from the top ten will hold their session on monetary policy – the Reserve Bank of Australia and the Bank of England. This time, no one expects any changes in both cases, the reaction of corresponding currencies will depend on accompanying comments. Neutral comments by the RBA can support Australian dollar. And the lack of hints for increase in rates by BoE will hit British pound hard.
Today we will see final data on production PMI in the Eurozone. Preliminary data were slightly better than expected, and if they aren’t worsen, then it will be a positive for euro. The similar PMI of the U.K. isn’t so optimistic and can stop pound’s growth, detected on Friday. In this regard, US production ISM is of most interest today. The indicator is now close to 50 points, if it falls lower, then it will hit dollar hard.
On Friday we opened short position in EURUSD pair for 1.1015. However, sharp growth of the pair appeared after publication of American statistics made us doubt whether our choice was right. Therefore, we decided not take a risk and left short positions before the closure of the market, when the common currency returned below 1.1000. Now we don’t exclude repeated testing of Friday’s maximums, though renewed descending trend remains the main option for us. Now we stay out of the market.
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