EUR/usd
The markets seem to be gripped by the holiday mood. The decrease in the number of market participants clears the way to stop-order levels. It's especially typical of our digital era, when trading depends largely on the digital algorithms. At such moments like this the pair, leaving the established trading range, stumbles over an avalanche of stop orders, which boost the further motion etc. In our case, the single currency, cursed by everyone earlier this year, is now the best among the majors. For instance, against the dollar the euro has been appreciating for 8 days in a row and is now trading at its 7-month highs around 1.3250. The currency has grown by a big figure over 24 hours and altogether its gains during the rally time make about 4 figures (from 1.2880 to 1.3240). It's not much when compared to other episodes in history. What looks remarkable here is the strength of buyers, rather than their persistence. The move is steady, without retracements, and doesn't have any important news behind it. Americans are buying up the euro since purchases of dollar assets are losing their relish. For example, after the Fed's announcement yesterday the yield of 4-week bills dipped to 0.015% against 0.175% a month ago. This means that the yield is almost all gone. However, this doesn't concern long-term bonds. The yield of 5-year bonds is growing as investors expect a higher inflation than could be without the Fed's actions. Here as well the influence of “the big hand” is obvious. The yield makes just 0.77%. Since June (when extension of Operation Twist was announced) this indicator has been fluctuating between 0.6% and 0.8%. For comparison, such short-term bonds as 6-month Spanish Letras have the yield of 1.61%. Under such circumstances it's easy to understand why investors are busy with a search of lucrative assets. Now such assets are bonds of troubled EU countries and stocks in the exchanges. In our opinion, the upward move is not over yet and may continue till the end of the year, driving the euro to 1.34/1.35. Yet, entry points should be selected with caution.
GBP/USD
The pound is trying to keep up with the euro, but most of the time EURGBP is growing: the pair is again at the local high of 0.8140, from where it was falling earlier this week and at the beginning of December. Yet, weakness of the dollar is obvious. The cable keeps hitting new highs. At the moment gbpusd is trading at 1.6260. Trading at such levels should be watched carefully. Earlier in September and at the end of April the sterling was actively purchased. In September it dropped by 10 figures and in April – already by 4. This time it may go further. On the other hand, the pound is just entering the overbuy zone, so it may grow easily on triggering stops. The main thing here is to be able to catch at 1.63.
USD/JPY
usdjpy is back at the weekly open of 84.30. The interest rate will be announced early tomorrow morning. The markets hope that the pressure of the new government on the BOJ will be realized through another stimulus package of at least ¥10 trillion and through softening of lending terms. Thus, the privilege to use “cheap” money will be granted not only to banks, but also to some corporations.
USD/CAD
The US dollar is depreciating against most of its counterparts. Though there are some exceptions and the Loonie is one of them. This performance of the pair looks strange after the favourable employment statistics for November. But the fact is obvious: traders pay no attention to the employment data, focusing on the economic indicators, which, by the way, neither demonstrate impressive growth nor pose a risk of higher inflation. Apparently, this is why traders are now taking their profits after the decline of usdcad, observed since early November.
