Time is ripe to sell EUR/USD | 14 February 2014

Review of the past week

Since the last week was the first week of the month, it was traditionally eventful. According to its results, EUR/USD pair consolidated for 1.1% as ECB governor was positive in his comments and labor market report in the USA was weak. Mario Drahgi continues to surprise market with his optimism. On Thursday 6, while speaking in the ECB meeting, he stated that deflation does not threat Europe now and there is no sense to apply measures to cope with it now. Investors were encouraged by this statement and EUR/USD went above 36.

On the last trading day of the week, release on the US labor market was published. January growth of Non-Farm payrolls was 113 000, which is rather below the figure of consensus-forecast. For the second month in a row, US employers are at an easy pace when it comes to hiring. This is an alarm bell for the US economy and served a background for growth of the European currency. Week's trades were closed at the point of 1.3634. In the fight of bulls and bears on GBP/USD pair there is no winner. Over the past week, Markit Economics research center had been releasing PMI for manufacture and construction as well as for the service sector. Amongst all, only construction report was a good surprise for investors wherease two other were below expectations. This negative background encouraged bears who forced quotations down to 1.6251.

Bulls also paid back in their own coin and got out the most of the weak US Non-Farm payrolls report by raising quotations above 64. Nevertheless, in the end of the week GBP/USD lost its symbolical 0.1% and finished at 1.6407.

Japanese Yen followed its upsurge in January and early February by retreat. Only the first trading day of the week was marked by its consolidation against its US rival as sales on leading global stock exchanges was going on. On Wednesday 5, the report on change in salary for December was published. The figure was above consensus-forecast which supported demand in Japanese currency in the first half of a day. Salary growth will provoke increase of expenses in the future and thus enhancement of inflation. On this background, USD/JPY dropped down to 100.77, but bears were not strong enough to get more. Then bulls joined the game who were not discouraged by weak report on the US Non-Farm payrolls in January. Having added 0.3% for the weak, trades were closed at the point of 102.35.

Forecast for the week February 10 – 14:

EUR/USD:

A new weak on the Forex market will not be as eventful as the last one. On Tuesday a new Fed Reserve Chair Janet Yellen will speak out. The last weak reports on labor market made investors contemplate if it is sensible to go on with tapering of stimulative measures. In this regard, it will be interesting to hear Fed Reserve Chair's opinion about troubles on the labor market.

On Thursday 13, January retail report will be released in the USA. Weak reports on labor market and consumer confidence from Michigan university do not allow to expect a positive release on retail. We can expect the data to be on the medium level of forecasts which will render a short-term support to EUR/USD pair. European GDP for the 4rd quarter of 2013 year will be published on Friday. Anticipating indicators show a multidirectional tendency: personal consumption seriously dropped as for the last quarter, but trade balance grew and unemployment decreased for 0.1%. Since personal consumption form 2/3 of GDP, we can expect data to be just worse than the medium level of forecasts which will put a pressure on euro. In general, EUR/USD can show a flat tendency.

GPB/USD:

On Wednesday 12 Bank of England will publish quarter report on inflation. This event usually captivates investors and besides this week will no longer provide significant reports for Great Britain. Over the last months, inflation in GB had been going down and reached a target level of 2%. On scheduled meeting, the British regulator will point out new guidelines on unemployment further to which increase of the interest rate is probable. Positive forecasts for economic growth can render a short-term support to the “cable”. USA will publish Jan report on retails which will not be able to support US currency. In general, flat tendency may work for the pair within this week.

USD/JPY

On Monday Japan is publishing report on December numbers for current accounts. December decline of the Central Japanese Bank's gold and currency reserves for 8.6 bln $ is a negative factor. Import expenses in December increased which is also negative for trade balance. The report can be expected to be on the medium level of forecasts or just above of it which will not assert a significant influence on trades with USD/JPY. On Tuesday investors will focus on public speech of a new Fed Reserve's Chair - Janet Yellen. On Thursday US will publish a report on retails for January. Personal consumption makes up a remarkable part of GDP and this figure is always closely monitored by investors. A modest growth of Non-Farm as well as drop of consumer confidence reported by Michigan university does not allow to expect a positive report on retails which will put a short-term pressure for USD/JPY pair. In general, flat tendency may work for the pair within this week.