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Correction is near, the question is when it starts

Correction is near, the question is when it starts
On the last day of the month the common currency suffered most. Weak data on retail sales remained negative to it. Most other currency pairs were more stable – American statistics, which were worse than predicted, provided such an opportunity. Trade currencies got support from energy prices, where bulls tried to recapture the initiative after messages that OPEC reduced oil production in November. Taking into account that euro has most weight in dollar’s index, it still allows it to retain positive dynamics following outcomes of yesterday’s trades.

This day will be chaotic in terms of news background. There are many events and they can have different influence on dynamics of various currency pairs. The Reserve Bank of Australia has already held its session on monetary policy, leaving interest rates unchanged. It supported Australian dollar, but in general the situation remains complicated for trade currencies – though Chinese indices of business activity, which have been published today, improved, still production PMI remains below 50 points.

A huge set of statistics is expected in the Eurozone – final data on business activity, unemployment and final data on GDP for the 3rd quarter in Italy. Under other circumstances, they can be movement drivers, but now they are on the periphery of market players. Positive is unlikely to help the common currency, negative will be met with great enthusiasm.

Today Mark Carney is to provide regular report of the Bank of England on financial stability. The recent cooling of BoE to the idea of increase in rates can play a trick with British pound – if Carney doesn’t retain intrigues and bury these hopes, then pound will collapse.

Canada will publish report on GDP for September. Improvement of economic situation seems to appear in the 3rd quarter. The data are important on the threshold of tomorrow’s session of the Bank of Canada. Changes aren’t expected. Canadian dollar is resistant and keep up with European currencies, as well as other trade currencies, which track dynamics of energy prices carefully. If the report is better than expected, then Canadian dollar will play its own game and try to renew growth.

At American session the focus will be on production ISM. From July the indicator has been consistently falling, though it has little influence on dollar. Positive will be useful, it will add incentive to dollar. Still, only fall of the indicator below 50 points can be regarded as a negative, in this case dollar can face serious problems. Everyone is waiting for the ECB session this week.


Trade tactics:

EURUSD pair has already made three attempts to break trough the range 1.0560 – 1.0570, but every time it met resistance. Yesterday there was most insistent attempt, but it failed to break this level. Euro’s sales aren’t so attractive now. However, we don’t see grounds for purchases at this moment. It is possible that correction will be preceded by another strong blow downward. Therefore we stay observers.


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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