27, January 2016

Fundamental analysis

EUR/USD (a 4-hour chart)

The United States can please traders with a Conference Board positive report. The January Michigan University consumer confidence indicator came in at fresh 6-month high amid real incomes growing expectations. The average earnings growth was 2.5% at the end of 2015, with an inflation of 0.7%. Thus, the population real incomes increased by 1.78% while the real incomes increased by 0.99% in 2014. Positive data would support the US currency and we do not ignore the "risky assets" demand dynamics.

The euro significant strengthening against the dollar was the result of several factors. The very first one is the upcoming Fed meeting today. Traders believe that the FED will not increase the refinancing rate and that decision may weaken the dollar. The Fed will monitor the macro-economic dynamics that demonstrates albeit sluggish, but a growth. The second factor is government debt securities yields growth where the three month bills yield increased from 0.255% to 0.305%.

We think that bulls can take a break and we will see a gradual pound decline. The Bank of England left the rate unchanged. Mark Carney, the Bank Governor said that there was no reason to do it. They are ready to reconsider the current situation when the country economy shows a stable growth.

The yen continued to strengthen against the US dollar when the Japanese Finance Minister Taro Aso supported the Bank position and its intention to act if needed. The main Bank of Japan target is the inflation rate of 2%. Aso expressed the hope that the regulator would continue its efforts to achieve the price stability, taking into account the economic and price conditions.