Forex Fundamental Analysis – Reset

EURUSD – UpEvents that need your attention today: Important macroeconomic statistics is not scheduled. EUR/USD: In the first trading day of the week I expect flat. No important news will be published today, that’s why take notice of debt and stock markets dynamics. On the debt market differential of profitabilities of 10-year US and Germany government bonds did not change on Friday, that deprives us of important early indicator. Up trend continues at the biggest world stock exchanges, however, growth rate drops. In this regard, we might expect stock index correction on Monday, which is good for euro. On the other hand, index VIX shows that investors will keep risking, so in case of decrease of stock quotes bulls will actively enter long on attractive levels. That will influence euro as funding currency. Today a presentation by the president of European Central Bank Mario Draghi takes place, but I would not expect important declarations. Mario Draghi spoke several times this month but he only said that ECB will act according to the plan (keep the rates low and buy bonds until March, 2017). Current dynamics of forex is favorable for ECN: from the beginning of the fourth quarter the weighted average euro rate dropped by 2,9% to a basket of currencies. That increases the competitiveness of European products abroad and would increase export growth. Moreover, fall in the national currency’s exchange rate induces upward pressure on inflation rates. Thus, current trend is positive for ECB, so there is no necessity to talk about it. I expect flat 1,0540- 1,0650. GBP/USD: Today’s picture is mixed. On the one hand, profitability of 10-year UK government bonds on credit markets is growing moderately in relation to their counterparts from the United States and Germany, which is positive for the British currency. On the other hand, the pound has close historical correlation to oil which completed the trades by the fall of 3.9% on Friday November 25. That could put pressure on the pound exchange rate. The important news this week is yet to come, and today traders might prefer to wait to determine the further direction of the market. I expect a flat market 1,2430-1,2530. USD/JPY: On the one hand, this currency pair needs correction, as in the beginning of this month the quotations rose by 8%. “Trees do not grow to the sky” – US traders usually say, when they see such a rapid growth of quotations. In addition, there is great reason for this correction – inflation in Japan rose to its highest level this year according to the October data. the growth rather small (0.1%) but one need to remember that it should the past six months declared deflation in Japan. Due to above said, the absence of bad news is rather positive. On the other hand, D.Trump’s victory on the US presidential election caused risky trading, which might prevent yen from strengthening. On Friday, investors quickly redeemed decrease in quotations and ended the trading day above 113 figure. In my opinion, if we see a downward correction today, we might consider buying counting on the continuation of the uptrend. I expect a flat market 112,55-113,65.
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