Analytic reviews

Weak statistics from the United States of America can harm US dollar

 Initial Jobless Claims and Retail Sales statistics from US was weaker than expected and it had a negative impact on USD and changed the mood of traders against American currency. Talks about the possibility of US to stop the reduction of asset buyout have started again. But even though there is such a negative attitude towards USD, we hardly believe that American dollar has a gloom future and that Federal Reserve will stop the reduction of obligations and mortgage-backed securities buyback.

In order to take that decision Federal Reserve have to make sure that the economy growth for the last several months is relatively weak. Looks like a cold winter had a stronger impact on American economy than it was expected before.

To conclude with, we believe that the decrease of USD will not last for long.

Semen Kamensky​

EUR/USD still consolidating

Rapid decrease of EUR yesterday was due to the speech of a member of European Central Bank Executive Board Benoit Coeure. Mr Coeure announced that the bank will have a close look on the issue of a negative deposit rate as a possible solution to stop EUR consolidation and to stimulate company and consumer lending. But the speech of another European Central Bank Executive Board member Luc Coene leveled rapid decrease of EUR as he announced that the bank wants to get additional information regarding inflation perspectives before they decide either to take further actions for EuroZone economic support or not.

It looks like Mario Dragi can’t take a decision whether to take additional measures to decrease the value of EUR or not.  These is some sort of dilemma. On one hand strong EUR stops European economy from the recovery and on the other hand the decrease in value of European currency leads to mistrust for all the assets nominated in Euros.

It seems that ECB does not want to take any decision at the moment and the just expect a smooth reduction of asset buyout and general improvement of USA economy to increase the value of USD and ECB will not have to take any measures to  weaken the EUR.

Semen Kamensky​

First speech of new head of US Federal Reserve Janet Yellen did not have almost any impact on USD. She showed full continuity of Ben Bernanke approach. During her speech to US Senate Committee on Banking she spoke about the continuation of monthly stimulus reduction by 10  billion dollars but she also mentioned that the decrease of unemployment rate below 6,5% will not lead to monetary policy tightening. Due to that fact US markets continued to increase.

If to speak about currency market then there is quite unclear situation and we can make a prediction that in the absence of important news from US market dynamics will be formed by technical factors.

Due to technical overbought EURUSD and GBPUSD most likely will continue to decrease, while USDJPY and NZDUSD on the other hand are likely to increase due to own reasons. Japanese Yen can get a support in the short-term and even try to have a correction on the level of 101.00, but in general the correction will continue because of the soft monetary policy of Bank of Japan. New Zealand dollar get a support due to the fact, that Reserve Band of New Zealand expected to increase the refinance rate. But we do not expect a rapid increase. We believe that it is better to sell it when it comes to the level of 0.8400.

Semen Kamenskiy​

New Zealand dollar increased against US dollar before the speech of the head of US Fed Reserve Janet Yellen. Experts hardly believe that Yellen will be speaking about the buyout of the instruments with fixed assets reduction after series of negative economic statistics. But investors want Yellen to keep monetary policy the same especially in the part about asset buyout. 

Recommendations: we open short position in case the level is breached and there is a clear fixation under intermediate level of 0.8300 with small stakes and we increase our stakes if the price falls under 0.8240 with a short-term aim of 0.8180 and with a long-term goal of 0.8060.

We expect the prices for “Brent” oil to be stable in the first quarter of 2014 because of supply disruptions and due to low reserves of distillates. What is more, we have to take into the consideration the fact that prices are usually the highest in the first quarter. We expect the average price for “Brent” to be $103 in 2014 against $109 in 2013. OPEC keeps the control on prices and may decrease the mining if the prices decrease sufficiently. But in the short-term we expect it to be traded between $90 and $115.  Low air temperature in the North part of the world and low reserves of distillates in developed countries have an impact on the oil price growth. Also, technical Spring work on refinery stations can decrease demand and prices in the second quarter. If there is no difficulties with oil mining then the volume of production capacity in 2014 can increase for 2,2 ml barrels a day what will be the most significant increase of the last decades.

Andrei Batensky​

Market expect Yellen to announce the stimulus reduction

Speculations based on the latest weak Non-Farm Payroll statistics from US which was weaker than expected (113000 against 190000) still on-going. Due to this fact US dollar is yet to respond to one of the figures of technical analysis and US dollar index is traded under the level of 81.00, but higher than 80.50. This dynamics can be explained by the fact that the new head of Federal Reserve  Janet Yellen can announce the suspension of QE3 buyout.

Nevertheless, traders do not expect any announcements from Yellen about it today. We believe that weak statistics is due to surprisingly cold weather in North America. Even though there are such poor results in the labor market it is possible to make a prediction that Fed Reserve will change the strategy towards stimulus reduction. In case Yellen decided to suspend QE3 it will have a massive impact on US dollar.

By now we believe that the decrease of US dollar was due to technical factors as it was highly overbought.

Semen Kamensky​

There are almost no changes in value of Australian dollar on Monday session due to the fact that financial markets ignored weaker than expected non-farm payroll statistics from the United States of America which was published on Friday. Meanwhile investors are waiting for the first speech and appearance of a new head of US Federal Reserve this week.

Recommendations : we open short positions in case the level of resistance is breached and there is a clear fixation below intermediate level of support of 0.8900 with small stakes  and we increase our stakes if the price goes under 0.8850 with the short-term of 0.8800 and with the long-term of 0.8670

Analysis by Andrey Batenskiy

It is expected that GBP/USD will be traded at a higher level due to lack of trust by investors for US dollar and because of the demand for GBP as it is increasing against JPY. Level of resistance equals to 1.6418 (Friday maximum). If this level is breached, next level of resistance is 1.6445 (maximum of February 3), next – 1,6497 (maximum of January 31), 1,6566 (maximum of January 30) and 1,6606 (maximum of January 29). Level of support equals to 1,6345 (on hourly graph), next level is 1,6298 (Friday minimum). In case this level is broken it will lead the way to 1,6270 (Thursday minimum), next – 1,6261(moving average for the last 100 days), 1,6250 (Wednesday minimum), 1,619 (local minimum of December 17) and 1,6131 (December 17 minimum)

Analysis by Artjom Batenskiy​

Disappointing non-farm monthly results

Traders were disappointed with non-farm payroll results. Expectations about the increase of the amount of new workplaces failed. According to the report there were 113000 new workplaces in non-farm sector against expected result of 189000. We hardly believe that US Federal Reserve will change the approach of stimulus reduction they mentioned in December due to bad weather conditions and poor non-farm payroll statistics. Some sort of workforce redistribution has happened in the market. Amount of work places in public sector decreased by 29000, but on the other hand amount of available work places in construction sector increased by 48 000. What is more, unemployment rate decreased from 6,7% to 6,6%.

Once US Federal Reserve mentioned that unemployment rate of 6,5% is a critical level when refinancing rate can be modified. That is why the first speech and appearance of new head of US Federal Reserve which will take place on Tuesday morning will be vital.

By now there is no activity in the market. USD decreased a little bit on Friday and traders are waiting for any new important news.

Semen Kamenskiy​

Expectations from the meetings of ECB and Bank of England

There will be high attention on the meetings of both European Central Bank and Bank of England. Sure, investors are thinking about possible outcomes, expectations and changes in economic strategies. First of all, we believe that Bank of England will keep refinancing rate on the same level and secondly, it will be a sign that in the short-term refinancing rate will remain on same level as well. Despite the fact, that there is positive news about GB economy recovery it remains fragile and we hardly believe that “Old Lady” will go for the risk by changing monetary policy.

It is very likely that ECB will keep the same refinancing rate as well, because weak results of peripheral countries continue to bother top-level politicians and German economy can not solve all the Euro Zone economic problems on its own. Since there is a successful reduction of bond buying program by US Federal Reserveit can have an impact on EURUSD and the pair will continue to decrease. Even in case of bad US nonfarm payroll statistics it won’t do any good for EUR in the long-run. Mostly it is due to the fact that in the process of economy recovery USA are quite ahead of EU.

That is why Euro and British Pound can be under pressure after the meeting of ECB and Band of England, but massive changes can be seen after Nonfarm Payroll statistics from US tomorrow.

Semen Kamensky ​