EUR/usd
Mr. draghi is surely a more prominent figure than Ewald Nowotny. This is why his performance produced such a strong reaction in the market yesterday. And though the slope towards sales in the euro was really sharp, we didn't expect that fixing of ‘shorts' would run without even the slightest attempt to fight for an important psychological level of 1.20. We believe that yesterday's growth of the euro up to 1.2320 after Draghi's commentary was technical rather than caused by a sharp change in the market sentiment. The ECB's head said that the Bank would do its best to protect the euro, adding “… believe, it will be enough”. Hardly anyone has doubted that within the EU mega-bureaucracy it is exactly the ECB that can quickly improve the situation. Everyone understands that it will be just a delay, but the probability still exists. Selling the Spanish and Italian bonds, the markets were simply waiting for actions form Europe. Yesterday many thought that this moment had come. By the way, don't forget that now it is the period of minimal activity in the market, the volumes are very low and this partly explains such a span of motion. However, already in the middle of August the arrival of large volumes may be accompanies by the return of the May trend. That happened a year and two years ago. Only after another nightmarish month the politicians finally has set about handling the issue. And now their strongest desire is to have a rest, so we can hardly expect any significant shifts in the coming months. Technically, there's some room for slight growth. The stock market indexes also point to this. Till Tuesday- Wednesday the markets will live with one hope in mind that the ECB and FED will be ready to buy troubled country's debt: the ECB – the periphery countries' bonds and the Fed – mortgage-backed securities. In its turn it will make investments into high-yield risky assets more profitable. We've seen many cases when the market was mistaken in its optimism. And the European issues have never ended with a significant move forward. It has always been a long list of late half measures. As to the USA, there the issue cannot be solved only by the Fed's efforts, as what we see now in the country is the reduction of the local household and corporate debt load.
GBP/USD
The sterling was supported by good news from the Continent. At some point the pound was growing even stronger than the euro. But that was mainly caused by a technical correction after the strong growth in EUR/GBP on the poor GDP. This correction has already come to its end and further may be followed by a reversal on poor fundamental indicators from Britain. Very often poor GDP statistics have a profound influence on the indicators of business and household sentiments in Britain. It a very dangerous self-sustained spiral. Today there won't be any vital data from Britain, but next Monday will abound in statistics on housing market and activity in mortgage lending.
USD/JPY
Japan is sinking deeper in deflation. The most dangerous thing is that this decline is triggered not only by the energy price drop which has been observed over the recent months. The core price index excluding food and energy has sunk by 0.6% annually. The data on retail sales don't look very optimistic either. Annually the sales growth has made just 0.2% against 3.6% last month. The fundamental analysis for Japan has been and remains deplorable.
The S&P index has almost deceived us, performing a false downward break out of the wide channel. Nevertheless, the market optimism on Wednesday and especially Thursday significantly spurred the stock growth. The gap formed at the beginning of the week was filled, albeit with minimal volumes. Technically we expect a slack growth to our old target in the area of 1380 till Wednesday when the Fed will announce its decision on the monetary policy. The release of the commentary in its turn may cause either another downward move or an impulse for further growth above 1400.
