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Forex · News · USMarketNEWS / USMarket |
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Market is ready for technical correction…Rate dynamics and recommendations on USD-CHF and USD-CAD.
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09:14 06/10/2004
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Market is ready for technical correction…Rate dynamics and recommendations on USD-CHF and USD-CAD.
For once again, world financial markets immediately reacted to statements made by officials of higher rank. Yesterday, the one who shook the calmness, was FRS chairman Alan Greenspan, who said that FRS would do its best to restrain inflation. Such statement was interpreted as readiness to raise the level of basic interest rates in the nearest time period.
The head of ECB, Trichet, agreed with Greenspan, when evaluating the world economy situation. He stated that current high prices for oil contributed to inflationary growth and to GDB growth reduction. However, Trichet expressed his assurance that ECB could keep inflation below key 2.0% per year in 2005 in Eurozone.
Such unexpected statements crushed EUR-USD two patterns down from yesterday’s peak at 1,2350 to testing support at 1,2150. The fall of the given support is very much likely to take the market to such important level, as 1,20, which will be the last bastion on the way to another key support test at 1,1750-70. In this situation, Asian officials warn numerous currency speculators against hasty decisions. Yesterday, the Bank of Japan manager’s deputy, Muto, once again said that sharp changes in exchange rates of Forex market were unfavorable and his department would do its best to prevent such changes. Besides, he said that CPI would not be stable, so that to fight inflation in the country and that government would stick to current monetary policy.
Data on the two largest European economies (Britain and Germany) could not but affect the market. Let us remind that the key levels that can change market sentiments are 1,2150 for EUR/USD and 1,2570 for USD/CHF. USD/CAD had already tested the most important “bullish ”level at 1,34. Its falling will steeply strengthen sellers’ positions, who will definitely try to pull it to key dynamic support at 1,33.
We recommend buying USD/CAD rate, when it goes down to 1,34. However, big investors might start opening long positions from the current levels. Then, the closets target of its growth will be 1,3770 level.
The last statements, made by Greenspan, and the fact that the Board of Governors of the Bank of Canada decided to leave major interest rate unchanged contribute to bullish sentiments’ rise. Let us remind that overnight rate target was left on the level of 2.00%.
Market participants expected that high level of world oil prices and employment rate rise in Canada would contribute to tightening of monetary policy of the Bank of Canada. However, unwillingness to strengthen national currency prevailed in the process of decision-making.
That is why we expect that USD/CAD rate has already reached its critical level and we need additional signals to start opening long-term long positions on it. As a minimum, we need strong turning model on intraday charts.
Recommendations: while staying out of the market, pay attention to currencies’ behavior close to the higher indicated levels, as their falling will be the first signal in favor of further strengthening of the American currency.
Recommendations: while staying out of the market, pay attention to currencies’ behavior close to the higher indicated levels, as their falling will be the first signal in favor of further strengthening of the American currency.
The forecast was created by trans1.
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