Friday movements prove that summer trading risks are high…Rate dynamics and recommendations on USD-CHF and USD-CAD. by OpenForex.com

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Friday movements prove that summer trading risks are high…Rate dynamics and recommendations on USD-CHF and USD-CAD.

06:56 08/03/2004

Friday movements prove that summer trading risks are high…Rate dynamics and recommendations on USD-CHF and USD-CAD. High volatility of the Forex market, seen at American session last Friday, and unwillingness of the dollar to give away recently reached levels makes us assume that bull dollar sentiments are still rather strong. Let us remind you once again the tumult of Friday trading. Prior to the release of the U.S. GDP for the second quarter, market held its breath near the strong levels of resistance the fall of which promised victorious continuation of “green back” procession. However, when the data were made public, showing that GDP grew only 3% against the forecasted 3,7%- 3,8%, intensive selling of American currency started. That brought EUR-USD exchange rate to 1,2120 but after the release of Michigan sentiment index, that came out higher than forecasted, the given rate met strong resistance. Chicago PMI that rose to 64,7 in July against the expected 60 points helped to finally break “Eurobulls”. As a result, players started actively buying the dollar and it quickly recovered lost positions. Despite disappointing data on the U.S. GDP in the second quarter, we still see the stable growth of GDP, which increases the possibility of raising interest rate target 0,25% in August by FRS U.S. There appeared new factor that puts the pressure on the rate of the dollar. U.S. National Security Agency announced that the level of militant attacks’ threats had risen from medium to high. It was said that financial institutions of New York and Washington, D.C. could become the targets of militant attacks. The National Security Agency head stated that compared to the previous threats the present one was the most real. Let us remind that the dollar has always felt quite uncomfortable due to militant attacks’ concerns. This week, players’ attention will be fixed on the release of U.S. Labor market report for July that is scheduled for Friday. The meeting of the Monetary Policy Committee of the Bank of England is also to arise interest of the market participants. Despite the fact that the Bank of England said it was not planning raising interest rate target, the last data showed that the real estate market was overheat and housing prices are 30% higher than the real cost. As the result, many economists assume that interest rate target could be raised not by 0,25% but by 0,5% at the nearest meeting. In case that happens, pound sterling will pull up other European currencies too. The Institute for Supply Management’s national factory index in July supports the dollar. Index made up 62.0, whereas forecasted 61.5, previous value equaled 61.1. In a whole, steep movements of exchange rates within the limited range indicate low activity of investors, which is quite characteristic of vacations’ season and makes trading extremely risky. Recommendations: fall of day support at 1,1950-1,200 will give way to further decline of the rate to strong level of 1,10. So far, we are expecting correction that would be more significant than Friday leap of EUR-USD to 1,2120. Stay out of the market for now and wait for safer signals.

The forecast was created by trans1.