Vector Securities - Analytics

    Vector Securities

    377.25 5.25/10
    73% of positive reviews
    Real

    Euro hardly withstands growth of stock market


    On the last day of previous week we noted one detail – euro’s stability despite all difficulties. In general, European data were worse than predicted, especially it concerns industrial production. GDP was close to forecasts, though annual GDP of Germany was unexpectedly weak. US retail sales were better than expected. Stock indices showed active growth during all the session due to this news. Under these conditions fall of the common currency was quite limited, key supports stayed untouched, there was no even an attempt to break them through. According to it, now investors do not believe in confident growth of US economy, singular positive reports are insufficient. 

    The last week of the moth will be short – today is a day-off in the U.S.A., it is President’s Day. Most markets are closed, liquidity is low. In such cases movement is usually limited in the exchange market, currencies trade in narrow ranges. Considering forecasts for the week in general, then we presume that there are grounds for changes of market moods. Market players tend to believe that rates of monetary policy tightening will be corrected towards slowdown. The next session of FOMC will be held in a month, most analysts presume that rates will be left unchanged. It puts pressure on dollar. Besides, slow growth rates of American economy presses the stock market, where the threat of strong shrunk. The state of stock platforms facilitates stability of the common currency, despite of coming session of the ECB, at which monetary policy tightening is expected. Still, there is almost a month till this event and the market isn’t focused on it yet. Herewith, this week there will be series of events which are able to provoke higher activity of the market. First of all, it is minutes of last session of FOMC and the ECB on monetary policy. Players will carefully examine them, trying to find hints of regulator’s actions at nearest sessions. Secondly, it is the report on US inflation. If basic inflation is gradually growing, then dynamics of general dynamics is contradictory. There are risks that last fall in energy prices will have stronger influence on inflation data than forecasts tell. Besides, the U.S.A. will publish producers’ prices, industrial production and the data on housing market. Weakness of these data will influence stock platforms. Third, it is ZEW report on moods among investors. The forecast is negative, but euro’s reaction can be non-standard – weak data can influence investors’ moods in the stock market, which fall is a support fro euro under current conditions.

    Speaking of local data of this week, we’d like to highlight reports on inflation, unemployment, retail sales in the U.K., inflation in China, unemployment in Australia, inflation in Canada. We presume that this week main tendencies will remain the same in the exchange market – euro will continue unconfident growth against dollar, correlation between currencies will remain low, trade currencies will react actively to national statistics.

     

    Trade tactics:

    Growth of Asian stock indices at the opening of new work week after Friday’s positive closure of stock platforms in the U.S.A. influences euro and yen today after opening of the market. Both currencies are under pressure. Still, in the second half of the day pressure is to become weaker, as trades aren’t held at stock markets in the U.S.A. today. Herewith key support is still untouched in EURUSD pair. Therefore, we are going to renew euro’s purchases from 1.1200 – 1.1230 with stop at 1.1150 and initial aim at 1.1290. In case of a pair growth of more than 30 points from the entry point, rearrange stop at the entry point.

     

    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.


    To leave a comment you must or Join us


    By visiting our website and services, you agree to the conditions of use of cookies. Learn more
    I agree