Friday’s outcomes show that shifted expectations for pace of increase in rates by the Fed still prevail in the market. Official report on US labor and the whole set of published statistics can be called positive. Wages, new work places, production ISM grew more than predicted, Michigan University Index of consumer confidence was revised upward. As we presumed, market reaction to this positive was short-term. Dollar strengthened moderately after publication of the data, but lost all advantages by the closure. It indicates players’ unwillingness to change current tendency.
This week will be difficult in terms of trading. In general, all events can be regarded as of average importance. American economy is growing at slow pace, which is insufficient for active steps by the Fed. Now the regulator pays more attention to external risks. Dollar needs support in the form of strong and stable economic statistics, but there are no such data yet. This week there is few significant data in the U.S.A. – the data on production orders, ISM in service sphere, trade balance and minutes of last FOMC meeting. As usual, forecasts are contradictory – weak orders and trade balance, ISM can demonstrate some improvement. Minutes are especially intriguing – though last speeches of Janet Yellen were quite “soft”, still, some representatives of FOMC were more decisive about prospects of monetary policy tightening. If the content of minutes shows that most members of FOMC are “hawkish”, then it can provoke sharp growth of dollar.
Current weakness of dollar causes automatically growth of euro, though this increase is quite unstable due to common problems in the Eurozone. Here economic indicators also give contradictory signals. This week in the Eurozone there are payment and trade balances, German production orders and industrial production, general retail sales, producers’ prices and unemployment, plus, final data on business activity in service sphere and speech of Mario Draghi. Now only trade and payment balance are out of concern, there are some hopes for improvement in business activity in service sphere, starting from the similar data on production activity. The rest is at risk. Especially it concerns Draghi, if he raises the issue of quantitative easing in his speech.
Speaking of local events of this week, it is worth paying attention to the Reserve Bank of Australia session on monetary policy, industrial production and trade balance in the U.K., and Canadian report on unemployment, which are able to provoke notable movements of corresponding currencies.
Today expected events are contradictory. The data on Australian retail sales, published at Asian session, were weak, what influenced Asian dollar, though tomorrow decision of the RBA will become the main mark for it. In the afternoon unemployment data and producers’ prices of the Eurozone will be published. The Eurozone’s unemployment is still stable, but prices have some problems, what can put pressure on the common currency during European session again. Besides, pressure on British pound is also possible after publication of PMI in building sphere (against the background of uncertainty about outcomes of the referendum on exit from the EU any economic negative just strengthens this pressure). However, with start of American session moods can change. Forecasts on US production orders aren’t very optimistic, what can lead to renewed sales of dollar.
Before Friday’s publication of nonfarms, EURUSD pair had reached outlined target range , we preferred not to risk and closed our long position. For the rest of the time we were watching market swings calmly. The closure of day and week doesn’t give any signals in favor of opening short positions on euro, though there is some overbought in the pair. Probably, if there are no any surprises, then the pair will consolidate in the range 1.1340 – 1.1440 today. Now we recommend staying out of the market.
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