The EUR/USD needs new drivers | 18 July 2014

Euro

The euro remained under the pressure after the latest data showed that the industrial production in France, Italy and Netherlands fell in May. It renewed the concerns about the forecast for the eurozone economy.

Furthermore, the market sentiment fell on the growing fears about the financial problems of Espirito Santo Financial Group, the largest bank in Portugal.

The markets did not seem to pay enough attention to the U.S. Department of Labor report and showed the initial jobless claims fell last week by 110,000 to 304,000, six-week low, compared with the expectations index unchanging on 315,000.

Trading recommendations

We advised to long with the first target 1.3667. Once we break above the level of 1.3667, we think that the level of 1.3740 will be the next one.

Pound

There will not be the important UK statistics publication in the near future, however, the construction index in May might become the support for the pound. The index is expected to show the continued growth by 0.8% m/m and 5.6% y/y after 1.2% m/m, 4.6 % y/y in April.

It is unlikely that this information to trigger the sustained moving to the new high, likely all "cable/greenbuck" fluctuations will be implemented in a formed side corridor.

Trading recommendations

We recommend staying out of any deal now. If the price falls to below 1.7100 the first target is 1.6980. If the price grows the target is 1.7225.

Yen

In fact, the dollar continues to fall against the yen amid the Portugal financial crisis fears and the weak economic data in Europe.

The yen rises in price against the dollar amid the predictions of the Japan payments balance improving, as well as the stock markets correction, which has led to the increased demand for the safe assets.

Furthermore, the pressure on the dollar in these conditions has reduced the Fed probability on the raising interest rates in the short term. According to the experts in the market currently rate hike the chances assesses on 0.50% by July on the next year at 55%. For comparison, the futures market analysis results for the federal funds held on July 4 were estimated at 62%.

Trading recommendations

We advise to consider the sell position with the first target 100.30. Once we break under the level of 100.30, we think that the level of 100.00 will become the next target.