20, January 2015

Fundamental analysis

EUR/USD (a 4-hour chart)

The US dollar continued to strengthen against its major competitors - the dollar index basket (USDX) finished last week at the mark of 92.65, setting a new high for the last 11 years. The pair EUR/USD was again under attack, despite the US inflation and industrial production negative macroeconomic statistics. Nevertheless we see a slight correction on the pair. Disregard for weak reports indicates the strong bearish sentiment for the major currency pairs.

During the day the pair GBP/USD was consolidating. Earlier it fell by 0.24% - the pair EUR/GBP cross-rate decrease deterred the British pound decrease. This day Great Britain did not please traders with macroeconomic statistics and the downward trend was amid the US dollar growth along the entire market.

Strong growth in the US stock market encouraged bulls to short. The stock market reacted positively to the inflationary pressure compression - low inflation expands the US Federal Reserve soft monetary policy cycle that has traditionally been a bullish factor for the stock market. The US 2-year bond yields which reflect expectations for the Fed rates and for the last three weeks have been declining and reached the level of 0.48% that confirms the positive trend for the stock market.