Market Review for the week from 6 to 10 May

The U.S. dollar significantly strengthened its position in the period from May 6 to 10 as is becoming increasingly clear that the major central banks of the world will continue to loosen monetary policy. Significant steps in this direction have made the ECB, the Bank of Japan, the Reserve Bank of Australia. And expect further easing from the Bank of England, after the arrival of Mark Carney for the post of the head of his July 1. Against such a background, the dollar index USDX, reflecting the behavior of the U.S. currency against six major rivals, he added, for the week 1.1%.

The EUR/USD has formed a downtrend and tried on the strength of support in the 1.30 after the European regulator lowered the rate, and Mario Draghi, during his speech on Monday made it clear that the controller is ready to act further if need be. Amid deteriorating macroeconomic statistics from the region’s rate cut to 0.25% of the participants perceived the foreign exchange market is a fait accompli. For the week, EUR/USD lost 0.8%.

The Bank of England did not expand the quantitative easing program at the end of its next meeting, noting the effectiveness of some programs Funding for Lending. Against this background the British made an attempt to break resistance at 1.56 against the dollar. However, the weakening of European currencies pulled quotes pair GBP/USD down 1.54 support level. Closer to the end of the week it lost 1.4%.

Reserve Bank of Australia unexpectedly foreign exchange market participants lowered the discount rate by 0.25 percentage points to the level of 2.75% compared provoked sale. In addition, the regulator has lowered forecasts for inflation and made it clear that he expects economic growth below the long term average. Accordingly, AUD/USD broke support in the annual minimum, reaching parity.

The Japanese yen has found support in the 50-day moving average, and was able to overcome the technically and psychologically important level of resistance of 100 yen per dollar. In the second half of the day on Friday, it was quoted at 101.22 area, adding its follow-up 2.1%.

Forecast for week 13 — May 17

For the period from 13 to 17 May, is not scheduled release of important macroeconomic statistics that can have a significant impact on the dollar. The main release will be retail sales data, which will be launched on Monday 13 May. Traditionally, the report has a moderate impact on the foreign exchange market participants, but can cause movement in the stock markets, which will affect the intraday trend «American.» Overall, the dollar strengthened somewhat after the data on the labor market diminished pessimism about the prospects for the U.S. economy. In addition, the world’s leading central banks state their determination to ease monetary policy. Against this backdrop, the dollar has a chance to continue to strengthen.

The European currency will wait for data on the index of business optimism in Germany from the Center for Economic Research ZEW. Macroeconomic data from the euro zone is deteriorating. Peripheral countries are in deep recession, and the leading stagnate. The European Central Bank cut its rate by 0.25% and demonstrated a willingness to do a few more steps down. Recent data on the PMI indices in Germany and France were again fixed lower boundary for the recession mark of 50%. Accordingly, the expected substantial support for the euro from the ZEW data is not necessary. From the point of view of technical analysis for the EUR/USD pair is important technically and psychologically important support level of 1.30. To overcome it down may send quotations to around 1.2750.

The Bank of England on Wednesday 15 May will publish its traditional quarterly inflation report. British regulator, based on the improving trend of the indices and the positive PMI data on GDP for the first quarter of 2013, is more optimistic about the prospects for the economy in the second quarter. Some of his representatives felt that the program Funding for Lending (finance lending) is starting to produce results. However, the UK remains vulnerable to external shocks from the eurozone. Overall, between the pair EUR/USD and GBP/USD increased correlation, which weakened in the last few months. We believe that if the euro will overcome the downward support 1.30 against the dollar, the GBP/USD may also move to a mark of 1.52.

For the pair AUD/USD for the coming week is not scheduled major releases. We believe that it has a chance to continue to decline towards 0.96 as there is a tab in the price of the possibility of further rate cuts by the Reserve Bank up to the level of 2.00%.

The Japanese yen has overcome resistance at 100 yen per dollar. The intention of the Bank of Japan doubled the monetary base in the next few years for a long time continue to put pressure on the Japanese currency. From the point of view of technical analysis to the next movement is a mark of 108.40.


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Market Review for the week from 6 to 10 May | Web Trade For All - Forex trading, analytical reviews of the market and help for beginners