Exchange market risks are counterbalanced …Rate dynamics and recommendations on EUR-USD and GBP-USD. by OpenForex.com

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Exchange market risks are counterbalanced …Rate dynamics and recommendations on EUR-USD and GBP-USD.

06:44 06/21/2004

Exchange market risks are counterbalanced …Rate dynamics and recommendations on EUR-USD and GBP-USD. For once again, the situation is not in favor of the dollar. Investors had been given another cause for “running away” from the dollar in the form of data on current operations deficit in the U.S. and on the EU countries’ foreign trade balance. The U.S. Department of Trade said current operations deficit reached record level of $144,9 billion in the first quarter compared to $127,0 billion in the IV quarter of 2003. According to Department data, deficit is not covered well enough by inflow of capital to U.S. markets. Purchased assets, companies’ assets and government Treasury bonds had risen $125,6 billion in the first quarter of 2004 against $83.7 billion assets gain in the IV quarter of 2003. The overall volume of American assets, belonging to foreigners, had risen $447,6 billion in the first quarter after $230,3 billion gain in the IV quarter. The difference between exports and imports equaled $150,8 billion in the first quarter against $139,4 billion. Despite gradual rise of production and inflow of foreign capital in the U.S. economy, foreign trade balance rise concerns investors. Together with political stability concerns tied to militant attacks and the situation in the Near East, continuing growth of trade deficit is the main factor that puts pressure on the rate of the dollar. On the other hand, data on proficit rise in the EU made European currency players more optimistic. In Eurozone, foreign trade profocit had risen to 6.0 billion Euro in April from 2.7 billion Euro a year earlier. That is preliminary data that was published today by Eurostat statistical services. According to specified data, proficit made up 10.8 billion Euro in March against 3.4 billion Euro proficit a year earlier. Seasonally adjusted exports rose 1.8% in April compared to the previous month; imports rose 4.8%. Oil market situation puts pressure on the rate of the dollar again. Prices for “Brent” oil make rose 1,5%. European information agencies report that Norwegian oil extractors started undated strike, claiming higher wages and better work conditions. Note that Norway is the third oil supplier after Saudi Arabia and Russia. Recommendations: the Euro had “played out” to the top bound of 1,217 and 1,197 currency corridor. Wave 1 of short-term descending trend was followed by correction wave 2. That might result in possible development of trend wave 3 of descending trend. On the other hand, price trend to the level of 1,197 can be interpreted, as correction of a more global ascending trend. The fact that price is within alligator lines indicates the state of uncertainty and equals the chances – 50 to 50. No special events are expected today and price is not likely to leave the bounds of currency corridor. We recommend not opening new positions, while keeping the previous ones. The situation is similar with pound sterling. Pound is supported by the Bank of England rate hike expectations. Recommendations are the same, as for the Euro. Recommendations: the Euro had “played out” to the top bound of 1,217 and 1,197 currency corridor. Wave 1 of short-term descending trend was followed by correction wave 2. That might result in possible development of trend wave 3 of descending trend. On the other hand, price trend to the level of 1,197 can be interpreted, as correction of a more global ascending trend. The fact that price is within alligator lines indicates the state of uncertainty and equals the chances – 50 to 50. No special events are expected today and price is not likely to leave the bounds of currency corridor. We recommend not opening new positions, while keeping the previous ones. The situation is similar with pound sterling. Pound is supported by the Bank of England rate hike expectations. Recommendations are the same, as for the Euro.

The forecast was created by trans1.