The euro sharply fell at the end of the last week. Earlier it was able to strengthen against the US dollar, when it became clear that traders would not receive more detailed information regarding the asset purchase scheme. It is also likely that the euro exchange rate is growing until the ECB position towards the sovereign bonds buying remains unchanged: the ECB does not signal that if it is necessary it will be ready to do something more within its mandate.
The short-term inflation forecasts were again lowered in the euro area which is a negative factor for the European economy.
We advise to short with the first target – 1.2425.
The Bank of England deputy governor Ben Broadbent’s comments acted as a catalyst for the downward movement. The optimistic data about the supplying managers index for the UK construction industry were not accepted by the markets. Instead, they decided to focus on the Broadbent’s comments. The Monetary Policy Committee member made it clear that the UK is not ready for a rate rise and that buyers should think carefully about the debt levels.
The bulls have very little chances for the upward movement development - the UK 10-year bond yield is located near the annual lows that points out to the inflationary pressure decline.
We advise to short with the first target – 1.5850.
The former Japanese Finance Minister Hirohisa Fujii said that a further yen weakening may provoke the currency intervention and also the stimulus policy implemented by the Bank of Japan that leads to the yen weakening is wrong.
The investors continue to escape from risky assets which increase the demand for the "safe haven" yen. Even the US positive macroeconomic statistics has not helped the bulls - the number of initial jobless claims fell to the level of 287 thousand last week that is a positive factor.
We advise to short with the first target – 109.40. When the pair consolidates below the first target, we can open deals to the level of 108.70.
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