Vector Securities - Analytics

    Vector Securities

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    Today the focus is on US inflation and the Bank of Canada

    The most notable event of previous day was speech of the Bank of England head Mark Carney. British report on inflation seemed to give hope for recovery to pound, as it was better than expected. Still, this year’s first speech of Carney buried this opportunity – he claimed that it was too early to talk about increase in rates. It contrasts sharply with his speeches last autumn. Although ZEW report showed lower expectations, but in general components of the report were slightly better than predicted. Euro’s fall due to this event was limited. Other currencies moved in accordance with formed tendencies of the market. Initial bounce from minimums at the opening after long weekend at American stock platforms was short-term and indices started falling again. After bounce in the first half of the day, fall in energy prices renewed. Accordingly, euro and yen started growing again, and trade currencies renewed falling. 
    This day is difficult for everyone. In the U.S.A., the report on consumer inflation will be published. Nothing promises improvements, inflation varies around zero. Weak data can blow up stock markets again, and send indices farther down, which are in red zone with the beginning of Asian session anyway. In this case today’s data on housing market won’t improve the situation considerably, though this segment is all right now. This day can be especially difficult for British pound and Canadian dollar. The U.K. will publish report on unemployment. Expectations aren’t optimistic, especially it concerns wages. New negative after yesterday’s speech of Carney will become one more incentive for sales of pound. Canadian dollar is waiting for the decision of the Bank of Canada. There are two probable decisions of the regulator – decrease in rates or everything will be left unchanged. In the first case Loonie is able to try to renew annual minimums again, in the second case pair’s correction is practically inevitable. Under these conditions dollar finds it difficult to withstand pressure of bears, retaining force mainly against trade currencies. Still, there correction will also appear soon. There are risks that large-scale sales of dollar will start on wide spectrum of currencies. 
    Trade tactics:
    Yesterday USDCAD pair reached our aims during the correction and was closed for 1.4440. Following results of yesterday’s trades, short-term indicators discharged and there is a new opportunity for testing of fixed at the beginning of week maximums with breakthrough above 1.4600, what has been realized at Asian session today. However, we still have interest to pair’s sales at new maximums, but it is worth making decision only after the Bank of Canada decision. The range 1.4660 – 1.4690 is attractive for opening of short positions. Still, purchase of Loonie is risky now, so stop will be set further. We are going to set it above 1.4800. 
    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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