WEEKLY REVIEW FOR 24 – 28 01, 2011

Previous trading week was a week of the “weak dollar”. On Monday expectations for the strong European fundamentals supported the euro. Eventually the Euro-zone purchasing manager services index turned out to be at the level of 55.2, which was above the expectations of 54.3.

Previous trading week was a week of the “weak dollar”. On Monday expectations for the strong European fundamentals supported the euro. Eventually the Euro-zone purchasing manager services index turned out to be at the level of 55.2, which was above the expectations of 54.3. The annualized Euro-zone industrial new orders resulted in 19.9% against the forecasted 17.4%. As a result, the EUR/USD maximums were reached at $1,3640. According to the published information, the Irish political coalition collapsed, which increased the risk of the budget adoption, which has been based on the engaged country loan. Therefore, the euro started its negative trend. The EUR/USD minimum was reached at the $1.3540 mark on the same day. In addition, according to some experts’ opinion, the technical correction of the euro was taking place after the former growth of the single currency. 

At the same time the sterling incurred losses due to the negative forecasts of the UK GDP data, which was planned for Tuesday. Therefore, the GBP/USD pair dropped to $1.5920 minimums. The released on Monday Australian Producer price index data happened to be below expectations, therefore, the Australian dollar rate dropped.

On Tuesday the sterling demonstrated a sharp negative trend and the GBP/USD pair dropped for 200 points and reached the $1.5750 minimums. The release of the UK fundamentals showed that the UK GDP fell by 0.5% in Q4 after having increased for the last 4 quarters. The cold weather conditions could be one of the negative factors that hit the retail and service sectors. As a result, the pound demonstrated a sharpest drop in this month. According to the experts’ opinion, the possibility that the Bank of England would keep the principal rate unchanged, increased. 

On the same day the greenback decreased against the Japanese yen rate. The USD/JPY traded in the range of Y82.25 – Y82.54. Bank of Japan decided to leave the principal rate unchanged at the previous level of 0.10%.

The released Australian Consumer prices indicators turned out to be unexpectedly lower compared to their forecasts. The annualized Consumer prices index for the fourth quarter resulted in 2.7% when the expectations were at the 3.0%. As a result, the Australian dollar was under pressure on Tuesday.

On Wednesday the EUR/USD reached the maximums of $1,3709. German import prices showed growth for 2.3% against the forecasted 1.2%, which was published on that day. Expectations for the strong EC fundamentals release next day supported the euro as well. On Wednesday the greenback was mainly under pressure and decreased against major currencies. According to the final decision of the FOMC meeting, the QE2 program was left unchanged at the previous level. The interest rate was left at the level of 0.25%. Among the published fundamentals, the US New home sales demonstrated growth and reached 329K against the forecasted 300K. 

The released on the same day minutes of the meeting of the Bank of England resulted in a sharp growth of the sterling. According to the published report, Andrew Sentance was supported by another confederate, who also voted for the increase of the interest rate for 25 basic points. The GBP/USD reached the maximums of $1,5904. We should also mention that on Wednesday the Reserve Bank of New-Zealand left the principal rate unchanged at the level of 3.00%.

According to the released information on Thursday, the rating agency S&P reduced the long-term sovereign rating of Japan to the “??-” level with the stable forecast. As a result the Japanese yen rate dropped sharply against the major currencies. The USD/JPY pair grew and reached maximums of Y83.00.

During the morning trading the US dollar received substantial support after the released S&P rating for Japan. All major greenback competitors dropped. The euro and the sterling demonstrated negative movement against the US dollar. On the same day the statement of the President of France, Nicolas Sarkozy in Davos, rendered considerable support for the euro. The President spoke on behalf of France and Germany, and he pointed out that “they would do everything possible to protect the EC”. Therefore, the euro reacted immediately and strengthened against its major counterparts. The EUR/USD pair grew from the minimums of $1.3630 to maximums at $1.3760. Following the euro positive dynamics, the sterling also grew, and the GBP/USD pair increased to $1.5989. The greenback did not receive support from the published positive US fundamentals during the second part of that day. Pending home sales grew for 2.0% against the expected 1.0%. 

The released positive US fundamentals on Friday pressured the euro and the EUR/USD pair closed the trading week at the $1.3600 range. The GBP/USD rate decreased as well and closed the trading week at $1.5850.

Happy trading!

The company commenced operations in January 2007, established by a professional gold and foreign exchange dealer with over 10 years of experience. Currently domiciled and regulated in Panama.Author Risk Warning: You should not invest in FX or CFD the money you cannot afford to lose. An investment in FX and CFD is potentially risky to the investor, and in some cases the investor may not get back the amount he has invested. With... More