04.11.2014 - The yen continues to lose ground

The price of euro continues to move in a negative trend. The reason for the reduction remains weak economic data from the euro area and the strengthening of the dollar on the background of tightening monetary policy, strong corporate earnings and positive macroeconomic statistics. Yesterday we published data on industrial PMI in the Eurozone, which fell by 0.1 to 50.6 and the US that increased to 59.0, which is 2.5 better than analysts' forecasts. Today, trading will depend on the forecasts of the European Commission (10:00 GMT), the trade balance (13:00 GMT) and factory orders in the US (15:00 GMT). The activity of traders will be low until the publication of data on the US labor market on Friday. We maintain a medium-term negative outlook for the euro and recommend holding short positions.

The British pound was almost unchanged yesterday and continued to consolidate near the level of 1.60. Strong data on the manufacturing PMI, which rose to 53.2, against 51.5 expected, could not lead to the beginning of purchases due to the fact that investors are in a waiting position before the meeting of the Bank of England on Thursday and the data on the US labor market on Friday. Today it is worth paying attention to the data on the construction PMI in the UK (09:30 GMT). We recall that the construction sector is of key importance for the country. We maintain a positive medium-term outlook and wait for the resumption of the uptrend.

The Japanese yen continued to decline after the day off in Japan. The reason for the sharp drop in prices is the news about increasing program of buying government securities in Japan to 80 trillion a year. A stronger dollar is also negative for the yen, but it is a secondary factor after asset purchase program. Tomorrow it is worth paying attention to the statement by the head of the Bank of Japan Haruhiko Kuroda and the data on the monetary base in Japan. We forecast a further devaluation of the yen in the medium term and maintain a negative outlook in the near future.

The Australian dollar started to adjust upwards after the announcement of the Reserve Bank of Australia in which noted the positive outlook for the labor market, and again underlined overvaluation of the Australian currency. Negative factor for Australian exports is a crisis in the housing market in China. Meanwhile, retail sales in September rose 1.2%, while the trade deficit in September was 2.26 billion compared with an expected 1.78 billion. We maintain a medium-term negative outlook, but in the near future may see a short-term upward correction.

The price of the New Zealand dollar continued to decline, despite the strong support levels. The strengthening of the US dollar and weak data on the trade balance of the country continue to put pressure on quotes of the New Zealand currency. Rising volatility is expected tonight after the publication of data on unemployment in New Zealand (21:45 GMT). We see no reason to change the downward trend, but expect a slight correction in prices soon. Our medium-term outlook remains negative.

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