EUR/usd
Even the relatively strong PMI rates for May couldn't change the market sentiment regarding the single currency yesterday. The level of 1.37 was finally surrendered and now trading is held close to 1.3650. We got evidence of the downtrend formation when the pair dropped below the preceding low of 1.3675 and became sure about the bulls' strength when went below that level once again. The lows were not completely renewed as on Wednesday the pair declined to 1.3633 and this morning it only hit 1.3640. The current rates are extremely important for the pair as the 200-day MA is just 10 pips away, at 1.3630. Though there are lots of false and short-term breakdowns in the euro/dollar, observations show that breaking through this level may provoke moving by at least a figure in the direction of the breakdown. In our case, sinking below 1.3630 may take the pair to 1.35 already next week. It means before the ECB's meeting, so much awaited by observers and traders. With a careful eye to risks, we still believe that the downtrend has started and the single currency will dive below its 200 MA for long. It has been above this level for over a year and a half and now it runs the risk of getting under severe pressure. Globally, it is hard to count on sinking below 1.2040 ( the lows of July 2012) amid global and European economic growth. So, in our opinion, it is more reasonable to expect decline towards 1.25 within the next 9-15 months. This can be again followed by a long-term upward reversal as the discrepancy between the US and EU monetary policies will be fully exhausted. Yet, it should be realized that the current trend can't be absolutely uninterruptable – rollbacks, both long – and medium-term, are inevitable. After a sharp drop from almost 1.40 by three figures, market players may prefer to take their profits before the holiday, which will again bring the euro above 1.37. For those with the long-term vision even the current levels (1.3650) are not bad for selling. Short-term traders may benefit from the pair's rebound, selling it at a higher price.
GBP/USD
Yesterday's revised British GDP for the first quarter confirmed quite impressive economic growth at the beginning of the year. Anyway, players once again preferred to take profits on approach to 1.69. Looking forward to a complete reversal towards USD, we don't expect a return to 1.70. Market players might have built too high expectations into the rates, if they sell the sterling on such good news as yesterday's. However, for the reversal to be confirmed we need to wait until 1.6730 is broken.
USD/JPY
The pair has found buyers, but now mainly due to the growth of risk demand. Since February the pair hasn't gone beyond 101-103 for long and this week's decline to 100.80 took it to the lowest levels since the beginning of the consolidation period. It is quite typical for the pair to get stuck in the long periods of consolidation sometimes. But it should be taken into account that the BOJ's printing machine works to maintain growth in the pair, simply now it is not quite obvious due to the extremely quiet market.
Stock market players keep seeking where to channel easy money of the Fed. The agitated buying of penny stocks and companies' mergers and takeovers promises that the party will go on. However already now the levels of the market stress are the lowest for the last 7 years. Then it ended in a crisis of substandard loans. It scarcely will be the case now. But it still serves as a signal for the Fed and other central banks that possibly they won't have to worry about the market, should the cycle of toughening begin. For too long everyone was afraid to drop the market or frighten it as if it were a baby. Now it seems to be strong enough to learn the truth.
