Soft pressure on the euro

EUR/

The single currency is trying hardest to catch at 1.36. Yesterday it slipped from 1.3668 to 1.3585 in the course of the sluggish EU session. The only thing which prevented it from further  decline was strengthening of risk demand that was supporting the US exchanges. Whatever skeptics say about the minimum effect of the ECB's measures on the , it still exists. In the currency market the rates have shifted from the euro to the , so in the quiet market we see prevalence of gradual  euro selling in favour of the US currency. The latter will function more as a funding currency, it means the one which is used for issuing loans to buy other assets. The yields of debt securities were rather low as they were, but in addition to this now investors are busy with searches for the assets with higher yield. The ECB's measures look like a tiny brook filling the ocean rather than firing all the guns. But anyway these measures are sure to take effect in time. The ECB cut the rate and stopped absorbing liquidity, injected during regular auctions. In itself it made it clear that the Bank could stop its threats and pledges and proceed to action. The next promised step is QE. And though we may find in the coming days that the euro will not be very eager to sink into the liquidity sea, this factor will manifest itself stronger and stronger. Especially it will be seen against the background of other countries, which are considering to reduce their incentives. From the technical viewpoint EUR/USD remains below its 200-day MA and its attempts to get back stumble over selling. But usually if this level doesn't yield easily, it can be a sign of the further return to the former rates and resumption of growth, which is obviously in bulls' favour. From the fundamental point of view it requires a release of utterly disappointing statistics from the USA. 

GBP/USD

Having practically nothing to do with easing of the EU monetary policy, the is recovering after last week's weakness. It is especially obvious in the pair with the euro, but the dollar too pales before the British currency. Keeping 1.6700 to itself, the cable is now targeting 1.6800, being at this level since last Friday. Apart from the industrial production data, today the -bulls will pay their attention to the NIESR GDP Estimate in May – they need it positive. But surely tomorrow's employment statistics are of much more significance.

USD/JPY

The pair is still being sold, though must find it hard due to the overall growth of risk demand, carrying the stock exchanges to different kinds of highs. Against the multi-year lows of the market volatility we again wonder what will be with the pair should the stock exchanges start grand correction. It's quite possible that since in the recent years the yen has been one of the many currencies with low interest rates, the borrowed funds will be returned calmer than in 2007/08.

USD/CAD

The is trying to attack. Taking advantage of USD's hitch and also of the demand for commodity assets, it is attempting to recoup the losses of the preceding week. Well, this drifting of the currency is quite explainable, but only in case of falling below the support at 1.0830 we will be able to speak about a possibility of more continuous decline of USD/CAD. Then the next target will be the level of 1.0800, which has been within a wider downtrend since the beginning of the year. 

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