EUR/usd
Let's have a bit of practice in the political logic. Germany asserts that without the fiscal compact it's pointless to speak about any large-scale support measures in regard to the suffering countries. But the other day these very suffering countries suggested a closer integration than that pointed out by Germany. As is known, Merkel turned down this run of events: “only over my dead body”. What conclusion can we draw up? Only one – Germany is not at all eager to give any help, doesn't aim at closer integration and doesn't stand up for the preservation of the eurozone in its current look. Meanwhile the euro keeps sliding down evenly. After the sharp decline on Thursday it became clear that bears keep control over the euro and the break since the beginning of the month was taken just to consolidate the positions before an endeavour to go even lower. Yesterday the euro first fell below 1.2450, then bounced up, but still was not allowed to go above 1.25. Today we'll hear the first comments concerning the summit. The European politicians have to try their hardest to think of really convincing arguments which would make the market believe in the success of the summit and progress towards the resolution of the debt and sovereign crisis. Now everything is against the EU politicians: time, economy, even technical analysis. Since that moment the euro dropped from 1.3485 to 1.2285 vs. the dollar. Further, over the first two weeks of June there developed a correction during which the pair recouped 38.2% of its losses (highs of June 18 and 21). If the technical perspective proves true, the euro risks falling down to 1.1550. Though in our opinion, the 1.20 level will be hard fought for.
GBP/USD
As is often the case during the crisis, Bank of England Governor Mervyn King was rather pessimistic in his comments at the inflation hearings yesterday. He stated that over those few weeks which passed since the quarterly inflationary report had been drawn up the situation dramatically changed. Unfortunately, the changes were for the worse. As follows from the minutes of the MPC meeting in June, King proved to be in the minority, having voted for further extension of the QE programme. Judging by how the events in the EU banking system unfold, it's very likely that next week it will be decided to extend the asset purchase programme by £50bln.
USD/JPY
The descending trend in the yen runs roughly with the same pace as did the upward trend, observed in the pair since the second half if March. The uptrend requires just 2 conditions: the following maximum should be higher than the previous maximum and the following minimum should be also higher than the preceding minimum. Today the dollar/yen is trading exactly close to its local lows. It is a good time to check the hypothesis of growth in the pair. If today's trading is closed above 79.30 and then is followed by growth, it will be possible to say that the downward tendency is broken.
gold
With the peak at the end of February, sharp decline by May and correction off the May lows, Gold seems to repeat the euro dynamics. Nevertheless, as is the case with the euro, the observed growth could be caused just by the intention of bears to consolidate their strength before another attempt to break important psychological levels. The inflation drop together with the limited effect QE is able to produce on the economy and money supply may also turn against Gold.
