EUR/usd
Yesterday the market didn't hurry to stop a retracement. The single currency continued its upward trend against the dollar and hit a new local high at 1.28. Then, just like a day before, the pair moved off the maximums and took up a defensive position. Today we see systematic purchases in the pair, very cautious at the moment. But it can be just the beginning. We still believe that the euro's attempts to recover this week resulted from the technical short-squeeze and retracement after the large-scale selling since the second half of October. Our opinion is confirmed by the fact that the US stock exchanges keep declining. Thus, the demand for risky assets is decreasing despite the fact that the economic growth rate is not as bad as was feared just a couple of months ago. Yet, then we also considered the markets to be overoptimistic. Apparently, the realization of that overoptimism has come only now. The technical analysis also points to the possibility of the further decline of the euro. Yesterday the pair was very close to its 200-day MA. Now the bears that will be defending this level have livened up. The euro's reaction to the fundamental news seems to lack any logic. At the beginning of the week there were negative reports on the EU sentiments, yet the euro was growing. Yesterday the GDP stats proved to be better than expected, however the surge of optimism in the euro didn't last for long. Bernanke also puts pressure on the markets. Yesterday he emphasized that the housing market was “far from being out of the woods”. It surely means that the Fed will continue adding assets to its balance sheet. Yet we can hardly expect that the market will stabilize at the current levels. From the peak of September 14 S&P 500 has already dropped by 9%.
GBP/USD
In the meantime, the British pound has stabilized and is trading at 1.5850 against the dollar and 0.8050 against the euro. The latter pair tried to return to the upward channel yesterday (taking advantage of the euro's strength), but the support line of that channel turned into the resistance, which the pair failed to break through. For Britain this hard week is already over, today no serious publications are expected. Yesterday's statistics on retail sales proved to be rather disappointing. The optimism around Britain, formed by the GDP growth of 1% in 3Q, was gradually melting away during the week – first because of the increased number of unemployment claims and the inflation acceleration on the low rate of income growth, now also because of the 8% decline in retail sales.
USD/JPY
The Japanese yen was falling all through the morning yesterday. usdjpy jumped up to 81.40, though at the beginning of the week it had been just at 79.20. Later there occurred a retracement down to 81.0. Such performance of the currency is quite favourable for the Japanese market, almost the only growing market on Thursday and Friday. The approach of the new elections encourages the yen-sellers. The saying “buy the rumour, sell the news” is now in the “buy the rumour” mode. It is expected that the victory in the elections will go to the Liberal Democratic Party, which is likely to put higher pressure on the BOJ to stimulate the economy. However, don't forget that the LDP was in power for many years and the current state of affairs in the country is largely its “merit”. In the coming weeks it is quite probable that the pair will grow to 83-84.
AUD/USD
The aussie came under pressure since the market participants couldn't buy for long against the general market trend. The drop of gold this week, which became even faster yesterday, helped to push the pendulum towards selling. Now it will be interesting to watch the struggle for 200-day MA.
